Australia | May 21 2009
By Rudi Filapek-Vandyck
Westpac economists report unemployment expectations among Australian consumers improved in May for the third consecutive month. Westpac’s unemployment expectations index improved in May, declining by 1.0%. The index has now declined by 5.2% from its February peak, report the economists.
Unemployment expectations among consumers in Australia rose sharply from September 2008, jumping 33% over 5 months. This coincided with the global melt down. Similarly, recent evidence of a stabilisation in the world economy has triggered an improvement in domestic sentiment, the economists believe. They add this is apparent not only from consumers’ unemployment expectations but also a lift in business confidence from record lows.
Even with the 5.2% improvement in the index, Australian consumers are expecting the unemployment rate to rise substantially
Inflation expectations, on the other hand, declined in May, reinforcing the downward trend, Westpac economists report. According to the May survey, consumers’ median inflation expectation declined to 2.3% from 2.4%.
In trend terms, median expectation consolidated at 2.2%, unchanged from April. Westpac economists point out, the May read is a sharp improvement from 5.2% a year ago and is the lowest level since 1998. The last time expectations were sub 2% was in 1994.
The median expectation of managers and professionals dropped to 1.6%, down from 1.8% previously. The economists highlight this has taken the trend for this segment to a new record low of 1.65%. (data commenced 1995).
By contrast, the trend net balance expecting higher prices rose to 51.3% from 46.8%. The economists state they are inclined to view this as “noise in the data”.
The proportion of respondents expecting inflation within the 2% to 3% target band held steady at 10.6%, an improvement from the 12 month average of 8.8%.
The downtrend in expectations has occured against the backdrop of moderating headline inflation, the economists point out. They add the ABS estimates that annual inflation slowed to 2.5% in the March quarter, whereas a year earlier it was running at 4.2% and heading to 5%.