Among the doom and gloom surrounding many global markets, Australia has been a relative beacon of stability in recent years. However, this has started to shift in the last year as a housing slump threatens to take its toll.
Some positive news arrived this week in the form of a drop in petrol prices, which should stay low enough to help boost the average disposable income of Australian households.
This news will deliver the kind of boost to consumer confidence that is sorely necessary amid so much uncertainty and economic turmoil, and as the inevitable post-Christmas struggle hits hardest, it could not have come at a better time.
New figures indicate that Australians are already over the festive break and have eased back into their normal spending habits, which will serve as a happy bump to retail outlets that traditionally struggle right after Christmas. With so many other conditions leaving trade on already shaky ground, consumers are likely to welcome any hint of stability with open arms.
One of the most respected consumer confidence indices, the ANZ-Roy Morgan, has settled above its long-term average. Although it dropped 2.2% in the last week, it has risen back up by 1.4% to a much more palatable level.
With consumer confidence seen as one of the most vital indicators to assess how much each household is spending on average, both now and in the future, a swing toward spending is evidence that the Australian economy has the resilience to weather any storms that may be on the horizon.
ANZ Head of Australian Economics David Plank said that the strength ‘shown by Australian households amidst weak global and domestic cues is encouraging.’ This will give credence to the idea that the country is in a much better place to counter any downturn than it was during the last worldwide crash in 2008.
Interestingly, despite Australians just putting away their Christmas decorations for another year a couple of weeks ago, one key measure of spending has risen sharply. The ‘time to buy a household item’ piece of data on the confidence index has jumped up by 3.9% and is now at its highest since the start of October. This appears to fly in the face of some of the most pessimistic outlooks posted recently, indicating that even if bankers may be worried, their level of concern has yet to filter through to Australian households.
A drop in petrol prices should also play a big part in helping ease Australian household budgets. Unleaded is now at its lowest level in 17 months at a nationwide median of 121.2 cents.
CommSec Chief Economist Craig James said that petrol is down 12% across the last year. This is its biggest fall in over two years, which is likely to go some way toward explaining how disposable income is still manageable despite other factors threatening to cause issues.
There have been signs of a petrol price jump coming up soon, but James remains convinced that the resulting prices will be at ‘levels that shouldn’t play havoc with consumer spending plans.’