Australia | May 16 2007
By Rudi Filapek-Vandyck
The Westpac-Melbourne Institute Index of Consumer Sentiment rose by 7.5% in May from 115.3 in April to 123.9. The Index has now reached its highest ever level since the Survey began in January 1975.
Westpac economists comment the result can be seen as a major vote of confidence in last week’s Federal Budget. Other factors that would have supported the surge in confidence, they assume, are a record level for the local share market; a new 32 year low in the unemployment rate; a stronger Australian dollar; and the easing of inflation pressures which have kept the Reserve Bank on the sidelines.
Westpac notes April’s surge in confidence follows news that retail spending in the March quarter reached a 12% annual growth pace. The economists point out that retailers should continue to prosper in an overall environment of strong employment growth, booming consumer confidence, and $3bn in handouts before June 30 followed by $5.3bn in tax cuts.
According to the survey, confidence amongst Coalition voters soared by 10.1% while ALP voters’ confidence was boosted by 4.9%. The economists also noted a “massive” 18.4% jump in the confidence levels of those respondents earning incomes between $40,000 and $60,000 per annum.
With average total earnings for all employees (including part time) running at about $44,000 per annum it appears that the tax cuts have had their largest impact on average wage earners, the press statement reads.