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Australia consumer sentiment index bounces in June

A poll by the Melbourne Institute and Westpac Bank showed its index of consumer sentiment rose 4.7 per cent in June, recovering somewhat from a 7.0 per cent drop in May.

PUBLISHED : Wednesday, 12 June, 2013, 11:43am
UPDATED : Wednesday, 12 June, 2013, 11:43am

A measure of Australian consumer confidence bounced in June after two months of sharp falls, as households became less gloomy on the outlook both for their own finances and the economy.

The poll of 1,200 people by the Melbourne Institute and Westpac Bank showed its index of consumer sentiment rose 4.7 per cent in June, recovering somewhat from a 7.0 per cent drop in May.

That left the index 6.9 per cent higher than in June last year at 102.2, meaning optimists now slightly outnumbered pessimists.

“It appears that some of the factors behind the sharp drop in sentiment in May were temporary,” said Westpac senior economist Matthew Hassan. “In particular, concerns stemming from the Federal Budget may have eased somewhat in June.”

While respondents reported that most of the economic news they recalled had been negative, the survey showed a broad improvement in their assessment of the outlook.

The largest increase of 8.5 per cent came in the component index reflecting family finances compared to a year ago. The outlook for finances over the next 12 months also rose 5.3 per cent. This measure was up a steep 22.7 per cent on June last year, perhaps reflecting the impact of lower mortgage rates.

The Reserve Bank of Australia (RBA) cut its cash rate by a quarter point to a record low 2.75 per cent in May and markets are pricing in at least one more easing before year end.

Westpac is forecasting a cut to 2.5 per cent in August.

The survey’s measure of economic conditions over the coming year improved by 3.8 per cent, while the outlook for the next five years increased by 3.2 per cent.

In a positive development for retailers, a measure of whether it was a good time to buy a major household item climbed 3.7 per cent in June to a healthy 133.3.

Indices of whether it was a good time to buy a car or a house also held at historically high levels in June.

Overall, the current conditions index increased by 5.5 per cent and the expectations index rose by 4.1 per cent.

“Clearly consumers see this as an opportune time to make major purchases or enter the housing market, likely reflecting the low cost of finance and comparatively good affordability,” said Hassan.

He said consumers were becoming less risk averse on their savings with more identifying housing as the best place to save and fewer people keen to pay down debt.

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