Positive news on a potential coronavirus vaccine has seen another solid rise in consumer confidence, a potential bonus for retailers heading into Christmas.
The weekly ANZ-Roy Morgan consumer confidence index has risen a further 3.4 per cent, building on a 3.2 per cent gain, reaching its highest level since February.
The index has climbed for 11 weeks in a row.
“The news about the successful vaccine trial no doubt played a major role,” ANZ economist David Plank said.
“The strong result points to a potentially strong Christmas season ahead for retailers.”
Last week, pharmaceutical giant Pfizer’s said it was having ongoing successes developing a vaccine, which has a 90 per cent effectiveness.
On Monday, rival Moderna said trials of its vaccine showed a 95 per cent efficacy.
Mr Plank said an outbreak of coronavirus in South Australia was a reminder Australia was not clear of the virus just yet.
“But the trend in confidence is very encouraging,” he said.
Reserve Bank governor Philip Lowe believes it is possible the Australian economy could perform better than the central bank is predicting if there is good news on the vaccine front.
“If we do get further good news on the health front, we could have a rapid rebound,” he said on Monday night.
But Dr Lowe also warned there was still considerable uncertainty about the outlook and an extended period of higher unemployment was likely to be a consequence of the first recession in nearly three decades.
Population growth is also forecast to record its slowest rate since the First World War and is one factor in a complex picture for the housing market.
The market is also simultaneously adjusting to a recession, record low interest rates and substantial government incentives to support residential construction.
“So there are a lot of moving pieces at present and the effects are very uneven across different types of property and across the country,” Dr Lowe said.
He reiterated the central bank will not lift interest rates until actual inflation – rather than forecast – is sustainably within the two to three per cent target band.
“This will require significant gains in employment and a return to a tight labour market,” the governor said.
He again said the likelihood of the central bank having to turn to negative interest rates was extraordinarily unlikely.
Earlier this month, the Reserve Bank cut rates on its key measures to a record low 0.1 per cent, and also entered into a $100 billion bond buying program known as quantitative easing.