Australia | Dec 12 2007
By Greg Peel
Westpac chief economist Bill Evans has called the 1.8% increase – from 110.5 to 112.5 – for the December Westpac-Melbourne Institute consumer sentiment index a “solid result”, particularly as it has come in the face of 8.3% higher petrol prices.
It also comes amidst warnings that banks may shortly increase borrowing rates due to global financial turmoil despite the RBA having left rates on hold in December. There have been two rate hikes this year, but the sentiment index is still 5.9% above last December and 7.9% above last year’s average, Evans point out.
A change in government was another feature of this particular survey, and there are no surprises in ALP voter confidence rising 15.6% and Coalition voter confidence falling 16.2%.
Confidence in housing is the downer, however, with the measure of whether now is a good time to buy a house falling 4.5% in December. It is now down 22.6% over the year. In contrast, respondents who thought the bank was currently the safest place to put their money rose from 17.2% to 22.3%.
The outlook for the economy over the next twelve months rose a hefty 9.7% which may surprise, particularly given the measure over the next five years fell 1.6%. Retailers can be happy that 3.3% more respondents think its a good time to buy household goods.
Evans is sticking to his guns that the RBA will raise again in February, following the January 23 CPI reading and following some easing in global financial turmoil by that point.