Australia | Sep 12 2007
By Rudi Filapek-Vandyck
The Westpac-Melbourne Institute Index of Consumer Sentiment rose by 4.2% in September to 115.7 from 111.1 in August.
The economists at Westpac and the Melbourne Institute believe the 8.1% fall last month following the Reserve Bank’s decision to raise interest rates by 0.25% was bound to open the way for a recovery in September as history shows the first response to rate hikes usually takes place in the form of an overreaction.
Westpac-Melbourne Institute report the Index is now 14.3% above its level a year ago and 13.9% above the 20 year average. The average level for 2007 is also 14.3% above the 20 year average. As has been the case throughout 2007, the Index is indicating a particularly confident Aussie consumer.
The economists spotted some sharp contrasts with certain demographic groups. Confidence among 18-44 year olds was up by around 7% while those over 45 showed an increase of only 0.6%. On the other hand, confidence amongst tradespeople (up 16.8%); unskilled workers (up 12.8%); and sales and clerical workers (up 6.1%) contrasted with a fall of 0.2% for managers and professionals.
Also, confidence for those earning $20k-$40k surged by 15.4%, while it rose by only 2.3% for those earning more than $60k. Finally, confidence amongst ALP voters surged by 9% compared to only a 1.7% increase for Coalition voters.
All components of the Index were higher, the economists point out. The outlook for economic conditions over the next 12 months surged by 7.3% to be 27.1% above its level a year ago. Even more significantly, the much more stable “outlook for economic conditions over the next 5 years” rose by 6% to be 27.5% above its level a year ago. The outlook for family finances over the next 12 months rose by 0.8%, while the comparison with finances a year ago improved by 7%.
A few other stand outs from the September survey are the fact that the question of whether now is a good time to buy major household items increased by only 0.6%.
In the last two months response to the question of whether now is a good time to buy a house has tumbled by 7.9% (in July) and 19.6% (in August). The measure in August was close to the record low of December 2003, the economists point out. In September this Index rebounded sharply by 12.9% but it is still 16.3% below the read in June.
Households’ confidence towards real estate as an investment seems to have improved though with the largest proportion (22%) of respondents viewing real estate as the wisest place for saving, compared to 17.9% a year ago and 19.7%, three months ago.
Superannuation remains popular at 11.2% compared to 7.6% a year ago. Confidence in shares has fallen from 16.1% a year ago to 15.4% in the latest survey – hardly a surprise given the global turbulence since late July.