Australians have welcomed last week’s federal budget with confidence rising further, improving the prospects for household spending as the economy emerges from recession.
The weekly ANZ-Roy Morgan consumer confidence index – a pointer to future retail spending – jumped 2.1 per cent, its sixth consecutive increase and now stands at its highest level since late May.
“That is a budget bounce,” Treasurer Josh Frydenberg told reporters in Terrigal, NSW on Tuesday
“A budget bounce as a result of the measures we have put in place, as a result of the virus being suppressed and those restrictions being eased.”
ANZ head of Australian economics David Plank said this was the second-best response to a budget in the past six years.
“Consumers have given a thumbs up to the budget,” Mr Plank said.
There were also healthy increases in the survey sub-indices for “current” and “future” economic conditions and for “future finances”.
“If Aussie consumers believe their finances are going to improve, then they are more likely to spend,” Commonwealth Securities economists said in a note to clients.
Consumers went into the budget with a growing positive mood on the prospect Mr Frydenberg would deliver personal income tax cuts in his second budget.
The budget brought forward tax cuts planned for 2022, backdated to July, which were passed by federal parliament last week.
The extra money is timely with over one in five households reporting their finances had worsened in September, according to the Australian Bureau Statistics’ latest household impacts of COVID-19 survey.
A similar number reported they had taken one or more financial actions to support basic living, the most common by drawing on savings or term deposits or reducing their home loan payments.
Addressing Commonwealth Bank’s annual general meeting, CEO Matt Comyn said measures in the budget to grow employment should help to provide certainty and confidence for employers and employees.
“We also recognise that some Australians and businesses will continue to require support,” he said.
“For those customers who are facing financial hardship or need more support, we are offering solutions tailored to their individual needs.”
Mr Frydenberg was asked whether he felt the government was doing enough to support social housing.
“The budget did provide an extra $1 billion for affordable housing … and that’s brought that total contribution to around $3 billion,” he replied.
But he said the states have the primary responsibility for social housing and Reserve Bank governor Philip Lowe has said the states have the capacity to do more.
“The Commonwealth has done the heavy lifting when it comes to using our balance sheet and providing the spending across the economy,” Mr Frydenberg said.