Australia | Mar 12 2009
By Rudi Filapek-Vandyck
Westpac economists report consumers’ unemployment expectations in Australia stabilised somewhat in March, although their trend deterioration continued.
The Westpac-Melbourne Institute unemployment expectations index fell 0.7% in March to 181.86 after a 1.3% rise previously. Nevertheless, the small pullback failed to prevent the uptrend continuing, taking trend deterioration from its full history average higher still to 45.2% from 42.6%. The economists note this takes the average beyond the peaks of the 90/91 recession (31.7%) and 82/83 recession (35.8%).
The economists comment this can only continue the strong consumer impetus to increase savings, which was also apparent in yesterday’s consumer sentiment survey where the proportion nominating ‘paying down debt’ as the wisest place for savings rose to 23.4% in March. This marked a record high since this series began in 1995.
Consumers’ inflation expectations continued their steep downtrend in March, with the median expectations falling to 2.2% from 2.3% previously. This is the lowest level since December 1998. The trend level fell to 2.08% from 2.30% previously, which is the lowest since December 1997.
The economists point out the median expectation of managers and professionals rose to 2.2% from 1.8% previously, but the smoothed trend level fell to 1.79% from 2.00% previously. This marks a new record low (registration of these expectations commenced in 1995).
Also, the detail showed a 2.6ppt fall in the proportion of consumers expecting inflation above the 2% to 3% RBA target band (to 42.1%), and a corresponding 2.6ppt rise in the proportion expecting inflation within the band (to 9.9%). Also, the trend in the net balance expecting higher prices overall fell to 40.2% from 42.4% previously, this too marks a new record low (data since 1995).