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Biggest lift in consumer confidence in 11 weeksConsumer confidence
Consumer confidence rebounds: The weekly ANZ-Roy Morgan consumer confidence rating rose by 2.1 per cent to 116.5 above the average of 114.1 since 2014 and above the longer term average of 113.0 since 1990. The 2.1 per cent increase in the index was the biggest lift in 11 weeks.
Time to buy a household item: The measure of whether it was a good time to buy a major household item was down by 2.2 per cent to 126.5 last week – its lowest level since 10 September last year. The consumer confidence figures have implications for retailers, and other consumer-focussed businesses.
What does it all mean?
Revolving door leadership and political uncertainty aren’t good for either consumer or business confidence. But Aussie households have seen this all before and have largely become immune to the political dysfunction in Canberra since 2010. Nevertheless, cost of living pressures, elevated mortgage debt and anaemic wages growth are still restraining spending, particularly when it comes to major outlays on goods.
Investors, in particular, have shown resilience with the Australian sharemarket (S&P/ASX200 index) rising by 0.4 per cent yesterday in the first full day of trading since former Treasurer Scott Morrison was installed as Prime Minister of Australia. Australian shares did fall by 1.4 per cent last week on the back of political uncertainty, but remain near ten year highs reached on August 20.
Despite the ideological battles within the Liberal Party, Prime Minister Scott Morrison has overseen an improvement in the Australian economy since he became Treasurer in September 2015. The economy grew at an above-trend 3.1 per cent rate over the year to March, the unemployment rate has fallen to near six year lows of 5.3 per cent and a record run of job gains totalling 427,100 occurred over the year to January. Business conditions have been near record highs. And Australia’s fiscal position continues to improve with the annual rolling Budget deficit at $12.8 billion over the year to May, near the lowest level in nine years.
Irrespective of who is governing or in the Lodge at Canberra, there is unlikely to be any significant shift in monetary policy or broader economic fundamentals. The independent Reserve Bank of Australia is likely to keep official interest rates at record lows of 1.5 per cent for the foreseeable future, capping borrowing costs for most mortgage holders. And businesses are continuing to churn out robust profits, as evidenced by the current corporate reporting season.
Businesses and consumers, however, will be keeping a wary eye on the Morrison government’s key policy platforms around immigration, energy and taxation.
What do the figures show?Consumer Sentiment
The weekly ANZ-Roy Morgan consumer confidence rating rose by 2.1 per cent to 116.5 points, above the average of 114.1 since 2014 and above the longer term average of 113.0 since 1990. 
Four of the five components of the index increased last week:
• The estimate of family finances compared with a year ago was up from 107.4 to 108.7;
• The estimate of family finances over the next year was up from 119.6 to 123.3;
• Economic conditions over the next 12 months was up from 106.3 to 109.4;
• Economic conditions over the next 5 years was up from 108.1 to 114.7 ;
• The measure of whether it was a good time to buy a major household item was down from 129.3 to 126.5.
The measure of inflation expectations fell from 4.4 per cent to 4.3 per cent.
What is the importance of the economic data?
The ANZ/Roy Morgan weekly survey of consumer confidence closely tracks the monthly Westpac/Melbourne Institute consumer sentiment index but the former measure is a timelier assessment of consumer attitudes and is now closely tracked by the Reserve Bank.
What are the implications for interest rates and investors?
Consumer confidence ebbs and flows on a weekly basis. Political uncertainty contributes to volatility in the surveys. Australia has now had six Prime Ministers in the past decade – on par with the Italians!
New Prime Minister Scott Morrison was considered a ‘steady hand’ as Treasurer. And it appears that consumers and investors are willing to give him a chance to succeed, despite initial weak opinion poll ratings. Fundamentally, the economy and corporate Australia are both in good health and the Budget bottom line is improving.
But there are still some significant challenges ahead. More needs to be done on the policy front to boost labour productivity, which is the key to boosting real wages. And company profits are growing faster than wages, which makes any meaningful tax reform agenda difficult for the Morrison government to implement through parliament.
The ‘silver lining’ for consumers, however, is that there appears to be additional room for personal income tax cuts in the lead up to next year’s Federal election, which could boost consumption and alleviate pressures on stretched household budgets.
Together with stable and low interest rates, consumer views on their finances and the economic outlook has picked up.
CommSec expects official interest rates to be unchanged until late 2019.
Published by Ryan Felsman, Senior Economist, CommSec