Resilient consumers; Unflinching Reserve BankConsumer sentiment; Reserve Bank Board minutes
Consumer confidence: The weekly ANZ-Roy Morgan consumer confidence rating rose 0.1 per cent to 117.8. The index is comfortably above the average of 114.3 held since 2014, and above the longer term average of 113.0 held since 1990.
Reserve Bank: Minutes of the last Reserve Bank Board meeting were released.
House Sales: The Housing Industry Association reports that detached house sales rose 3.6 per cent in November – the biggest lift in 13 months and to 5-month highs. 
What does it all mean?
How has the Aussie consumer fared over 2018? The answer is: remarkably well. The latest reading on confidence has ended the year at above the “normal” or “average” readings recorded over both the short-term and longer-term. And when you consider ‘negatives’ like a weaker Aussie dollar, unsettled global economic environment, softer share and home prices and political instability, it is clear that Aussies are a resilient bunch. If consumers believed the ‘home price crisis’ stories being trotted out by some of the media, you would expect confidence levels to be affected. But that is not the case. The job market is strong, interest rates are low, homes have become more affordable and the economy has continued to expand.
All components of consumer confidence are above longer-term averages except for the question on whether it is a good time to buy a major household item. And even then the latest reading is only just short of longer-term averages. The most encouraging reading is the positive view of family finances over the next year – a key factor driving broader spending.
The Reserve Bank (RBA) was likely disappointed by the 2.8 per cent annual economic growth outcome for the September quarter. Board minutes show the RBA had expected growth of “more than 3 per cent” – above most estimates of potential growth.
Overall, there were no significant new insights in the RBA Board minutes. Board members expect GDP growth to be “above potential over this year and next”.
What do the figures show?Consumer Sentiment
The ANZ-Roy Morgan consumer confidence rating rose by 0.1 per cent to 117.8 in the past week. The index is above both the average of 114.3 held since 2014 and the longer-term average of 113.0 held since 1990.
Two out of five major components of the index decreased last week and two increased with one stable:
• The estimate of family finances compared with a year ago was down from +13.0 to +10.7; 
• The estimate of family finances over the next year was unchanged at +26.3;
• Economic conditions over the next 12 months was up from +5.7 to +5.9;
• Economic conditions over the next 5 years was down from +15.6 to +14.6;
• The measure of whether it was a good time to buy a major household item was up from +27.9 to +31.4.
The measure of inflation expectations rose from 4.4 per cent to 4.3 per cent.
Reserve Bank November Board minutes:
Job market: “Joint Reserve Bank-ABS analysis suggested that wages growth for jobs covered by the other two wage-setting methods, namely enterprise agreements and individual agreements, had also been stronger than a year earlier.”
Bank Lending: Members note ‘the pick-up in business credit growth in Australia in the second half of 2018.’ …’lending to large businesses had accounted for the bulk of the growth.’ …“By contrast, lending by banks to small businesses had increased only modestly over the preceding few years and had been flat in 2018. Moreover, small businesses’ perceptions of their access to finance had deteriorated sharply over the year, according to the Sensis survey.
Consumer spending: “In relation to household consumption, members noted that liaison with retailers suggested that underlying trading conditions had been stable and surveys suggested that households’ views about their financial situation had remained around average.”
Residential development: “Liaison with developers indicated that demand for new detached housing in eastern Australia had eased over the previous year or so and some developers had reported that this decline in demand had become more pronounced. Demand for off-the-plan apartments had declined significantly since mid 2017.”
Credit: “The slowing in housing credit growth had been almost entirely accounted for by the major banks, where the rate of growth in lending had been the slowest in many years. Housing lending by other financial institutions had continued to grow more strongly.”
What is the importance of the economic data?
The Reserve Bank releases minutes of its monthly Board meeting a fortnight after the event. The minutes give a guide to Reserve Bank thinking on interest rate settings.
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?
The Reserve Bank hasn’t changed the central message. There is no case for a near-term change in monetary policy. But the next move was likely to be an increase in the cash rate. The tone of the Reserve Bank Board minutes suggest ‘business as usual’, with no new issues of concern.
The RBA did discuss recent global sharemarket declines, but positively noted that the “US equity market continued to be supported by strong growth in underlying corporate earnings.”
The Reserve Bank Board will closely watch the job market over the next year. CommSec expects interest rates to be unchanged until at least November 2019.
Published by Craig James, Chief Economist, CommSec