CANBERRA, AAP – Australia’s robust economic recovery and falling unemployment has helped to lift consumer confidence to close to a 10-year high.
The Westpac-Melbourne Institute consumer sentiment index rose 2.6 per cent in March to just shy of the decade peak reached in December.
Westpac chief economist Bill Evans said the main factors driving the index – a pointer to future household spending – are improving economic conditions and prospects for the labour market.
“Australia’s success in containing COVID-19, the promise of vaccine rollouts bringing an end to the pandemic, and support from stimulatory government policies have all contributed to the sustained lift,” Mr Evans said.
Reserve Bank governor Philip Lowe believes the economy is now in striking distance of its pre-pandemic levels after the growth results in the recent national accounts proved materially better than expected.
Last week’s national accounts showed the economy grew by more than three per cent in two consecutive quarters for the first time in history.
The Organisation for Economic Co-operation and Development also expects the Australian economy to grow by a speedy 4.5 per cent in 2021, up from its previous forecast of 3.2 per cent made in December.
Its forecast for 2022 remains at a growth rate of 3.1 per cent, but still comfortably above a long-term trend of 2.8 per cent.
“Global economic prospects have improved markedly in recent months, helped by the gradual deployment of effective vaccines, announcements of additional fiscal support in some countries, and signs that economies are coping better with measures to suppress the virus,” the OECD said.
Addressing the Australian Financial Review Business Summit, Dr Lowe said the recovery in employment has been “V-shaped” with a welcome decline in the jobless rate to 6.4 per cent.
“Job vacancies, job ads and hiring intentions remain strong,” Dr Lowe said.
“This suggests that the unemployment rate will continue to trend lower, although this trend could be temporarily interrupted when JobKeeper comes to an end later this month.”
He said the unemployment rate needed to be below five per cent to drive wages growth higher.
“How low below five is hard to tell and I certainly hope, and it’s not inconceivable, we could sustain an unemployment rate in Australia starting with a three,” he said in answer to a question.
New figures show all states and territories are posting annual job advertising growth for the first time since the beginning of the COVID-19 pandemic.
Job ads posted on seek.com.au rose by 4.1 per cent in February, to be 12.4 per cent higher than a year earlier.
“It is close to 12 months since COVID-19 severely impacted the employment market and we are pleased to observe continued improvement with the healthiest year-on-year job ad growth since the pandemic began,” SEEK ANZ managing director Kendra Banks said.
However another survey showed some businesses could be in for a tough time as support measures put in place by the federal government at the start of crisis unwind.
The February CreditorWatch business risk review showed there had been a 61 per cent jump in firms entering administration since January, having been in decline in the past 12 months.
“This is a sign of the commercial climate returning to more normal conditions,” CreditorWatch chief executive Patrick Coghlan said.
“This figure is likely to rise again in the coming months, as JobKeeper ends and the three-month reprieve on credit arrangements for struggling smaller businesses comes to a close.”