Welcome Guest [Log In] [Register]


Reply
Consumer sentiment rebounds
Topic Started: 13 Aug 2014, 01:03 PM (295 Views)
CrossPost
Member Avatar


From Bill Evans at Westpac:
Quote:
 
This is a pleasing result. The index is now only 1.2% below its level prior to the Federal Budget on May 13. Over the last three months the index has increased by a total of 5.9% indicating that much of the damage to confidence in the aftermath of the Budget has been repaired. However, the index has not reclaimed any of the ground lost between November 2013 and April 2014, when enthusiasm associated with a new government appeared to wane.

The Index is still around 10.8% below its post-election peak. There seems to be a number of politically-based factors that may be boosting confidence. Firstly, since the last survey it has been announced that the unpopular carbon tax has been repealed. Secondly, households have also probably been buoyed by resistance in the Senate to many of the unpopular Budget measures. It would seem that households are now assuming that some of these measures will eventually be moderated or abandoned. With the Senate set to reconvene on August 26, households will be anticipating a restructuring of the Budget that was released on May 13. If instead we see renewed disorder and indecision in the Senate, that runs the risk of dissipating this encouraging lift in confidence.

The rebound in confidence augurs well for a continuation of the lift in retail sales reported for June, which followed three consecutive soft months.

While the Reserve Bank did not cut interest rates over the month, some banks have been lowering rates for new loans, reflecting recent declines in market rates as the slowdown in activity has seen a reassessment of prospects for the official cash rate.

In August we saw the confidence of those households with a mortgage jump 12.8%. There were some significant moves in components of the Index.

The sub-index tracking assessments of ‘family finances vs a year ago’ increased by 11.9% to be only 4% below its pre-Budget level. The sub-index tracking expectations for ‘family finances over the next 12 months’ increased by 2.4% to be 7.3% below the pre-Budget level. However recall that immediately following the Budget announcement this component plummeted by 23% to record lows. More encouraging was the sub-index tracking expectations for ‘economic conditions over the next 12 months’ which improved by 8.3% to be only 0.5% below its pre-Budget level. The sub-index tracking expectations for ‘economic conditions over the next 5 years’ fell by 3.9% while the sub-index tracking assessments of ‘whether now is good time to buy a major household item’ increased by 1.9%.

Expectations for job prospects improved modestly. The Westpac- Melbourne Institute Index of Unemployment Expectations fell from 156.1 to 151.4 (down 3%). Recall that lower reads indicate reduced concern around the labour market. The index is now 7.9% below its recent peak back in March.

This gradual firming in the outlook the labour market has come despite news of a sharp increase in the unemployment rate from 6% to 6.4% in July. That information was released on August 7, mid-way through the August 4-9 survey period. We will probably have to await the next survey to get a clean read on the impact of this unexpectedly sharp rise in the unemployment rate. That said, households do appear to be gradually feeling more secure in their employment despite the negative reception to the Budget.

There was also good news for the housing market. The index tracking assessments of ‘time to buy a dwelling’ jumped by 9.7% to be 12.1% above its post-Budget read. Expectations for house prices have shown similarly gains with the Westpac-Melbourne Institute House Price Expectations Index rising 7.6% to be up 20.6% from its May read. This result is consistent with the boost in confidence we saw amongst respondents with a mortgage and may also be reflecting the lowering of some market interest rates.

The lift in confidence amongst respondents with a mortgage has come despite little change in outlook for interest rates. A clear majority of consumers still expecting rates to rise. The August survey found 63% of consumers expect mortgage rates to be higher in 12mths time, with 28% predicting ‘no change’ and just 9% expecting rates to decline. That mix is very similar to the last time we ran this question in February, which found 61% expected interest rates to move higher.

The Reserve Bank next meets on September 2. The Bank has made it clear in both the Governor’s recent statement and its August Statement on Monetary Policy that it expects the period of rate stability to continue. However it has lowered its growth forecast in 2015 from 3.25% (trend) to 3.0% (below trend). In theory that would imply its forecasts are pointing to lower rather than higher rates. We think the Bank is being overly cautious on the growth outlook. Specifically, the Bank’s forecasts do not indicate a lift in growth momentum through 2014. We expect the consumer to be running at a faster pace in the second half of 2014 than in the first with some spill-over to non-mining business investment and employment.

That prospect has certainly been boosted by this reported lift in confidence and the recently reported rise in business confidence. However, maintaining and lifting this confidence will be particularly dependent on a resolution to the current political discussions around the Budget that will resume on August 26.

It is our expectation that such a result can be expected and we remain confident that the next move in rates will be up, although not before the September quarter of 2015.
Profile "REPLY WITH QUOTE" Go to top
 
1 user reading this topic (1 Guest and 0 Anonymous)
« Previous Topic · Australian Property Forum · Next Topic »
Reply



Australian Property Forum is an economics and finance forum dedicated to discussion of Australian and global real estate markets and macroeconomics, including house prices, housing affordability, and the likelihood of a property crash. Is there an Australian housing bubble? Will house prices crash, boom or stagnate? Is the Australian property market a pyramid scheme or Ponzi scheme? Can house prices really rise forever? These are the questions we address on Australian Property Forum, the premier real estate site for property bears, bulls, investors, and speculators. Members may also discuss matters related to finance, modern monetary theory (MMT), debt deflation, cryptocurrencies like Bitcoin Ethereum and Ripple, property investing, landlords, tenants, debt consolidation, reverse home equity loans, the housing shortage, negative gearing, capital gains tax, land tax and macro prudential regulation.

Forum Rules: The main forum may be used to discuss property, politics, economics and finance, precious metals, crypto currency, debt management, generational divides, climate change, sustainability, alternative energy, environmental topics, human rights or social justice issues, and other topics on a case by case basis. Topics unsuitable for the main forum may be discussed in the lounge. You agree you won't use this forum to post material that is illegal, private, defamatory, pornographic, excessively abusive or profane, threatening, or invasive of another forum member's privacy. Don't post NSFW content. Racist or ethnic slurs and homophobic comments aren't tolerated. Accusing forum members of serious crimes is not permitted. Accusations, attacks, abuse or threats, litigious or otherwise, directed against the forum or forum administrators aren't tolerated and will result in immediate suspension of your account for a number of days depending on the severity of the attack. No spamming or advertising in the main forum. Spamming includes repeating the same message over and over again within a short period of time. Don't post ALL CAPS thread titles. The Advertising and Promotion Subforum may be used to promote your Australian property related business or service. Active members of the forum who contribute regularly to main forum discussions may also include a link to their product or service in their signature block. Members are limited to one actively posting account each. A secondary account may be used solely for the purpose of maintaining a blog as long as that account no longer posts in threads. Any member who believes another member has violated these rules may report the offending post using the report button.

Australian Property Forum complies with ASIC Regulatory Guide 162 regarding Internet Discussion Sites. Australian Property Forum is not a provider of financial advice. Australian Property Forum does not in any way endorse the views and opinions of its members, nor does it vouch for for the accuracy or authenticity of their posts. It is not permitted for any Australian Property Forum member to post in the role of a licensed financial advisor or to post as the representative of a financial advisor. It is not permitted for Australian Property Forum members to ask for or offer specific buy, sell or hold recommendations on particular stocks, as a response to a request of this nature may be considered the provision of financial advice.

Views expressed on this forum are not representative of the forum owners. The forum owners are not liable or responsible for comments posted. Information posted does not constitute financial or legal advice. The forum owners accept no liability for information posted, nor for consequences of actions taken on the basis of that information. By visiting or using this forum, members and guests agree to be bound by the Zetaboards Terms of Use.

This site may contain copyright material (i.e. attributed snippets from online news reports), the use of which has not always been specifically authorized by the copyright owner. Such content is posted to advance understanding of environmental, political, human rights, economic, democratic, scientific, and social justice issues. This constitutes 'fair use' of such copyright material as provided for in section 107 of US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed for research and educational purposes only. If you wish to use this material for purposes that go beyond 'fair use', you must obtain permission from the copyright owner. Such material is credited to the true owner or licensee. We will remove from the forum any such material upon the request of the owners of the copyright of said material, as we claim no credit for such material.

For more information go to Limitations on Exclusive Rights: Fair Use

Privacy Policy: Australian Property Forum uses third party advertising companies to serve ads when you visit our site. These third party advertising companies may collect and use information about your visits to Australian Property Forum as well as other web sites in order to provide advertisements about goods and services of interest to you. If you would like more information about this practice and to know your choices about not having this information used by these companies, click here: Google Advertising Privacy FAQ

Australian Property Forum is hosted by Zetaboards. Please refer also to the Zetaboards Privacy Policy