CANBERRA, AAP – A prominent economist believes it is critically important for the economy that confidence is high among Australians when the federal government ends its JobKeeper program in March.
The wage subsidy has been a key support measure during the COVID-19 pandemic and subsequent recession, but the government still plans to end the scheme next month.
“It is vital that households, which have built up a very large financial buffer through the pandemic, are prepared to now use that buffer to partially offset the impact on the economy of the withdrawal of support programs,” Westpac chief economist Bill Evans says.
The latest Westpac-Melbourne Institute consumer sentiment survey – a pointer to future household spending – shows optimists continue to have the upper hand over pessimists.
The consumer confidence index rose by 1.9 per cent in February, recouping around half the loss seen in January and leaving it just short of a 10-year high seen late last year.
Mr Evans said the survey released on Wednesday signals consumers remain “extraordinarily confident”.
“No doubt the management of the pandemic locally has had a constructive effect on confidence,” he said.
“The success of contact tracing and ‘light-handed’ lockdowns has been important in containing a worrying cluster of cases since the last survey in January.”
Last week’s commitment by the Reserve Bank of Australia to support the economy and consistent positive news on the jobs market would also have boosted confidence.
Business confidence has also started 2021 in a more positive mood, according to a National Australia Bank survey released on Tuesday.
However, separate figures show construction firms are struggling to pay their bills as the commercial building sector continues to suffer as a result of the pandemic – a potential worry for the broader economy.
Credit reporting agency CreditorWatch says payment times in the construction industry have jumped 47 per cent in the past year and now average 44 days compared to 35 days in December.
CreditorWatch CEO Patrick Coghlan said if the trend continued it could cause a multiplier effect across the economy and impact demand in manufacturing.
This would have dire consequences for the many small businesses operating in that part of the market.
“Encouragingly, residential construction is booming thanks to government stimulus and low interest rates driving demand in the housing market,” Mr Coghlan said.