Australia | Sep 02 2010
By Rudi Filapek-Vandyck
It was the biggest surprise in this week's second quarter GDP release in Australia, and its reverberations were felt across the globe, albeit, admittedly, in the slipstream of better than expected manufacturing indices in China and the US.
The specific surprise that underpinned a better than expected GDP result in Australia came from consumer spending. Growing at 1.6% in the quarter and 2.1% over the year the numbers completely blew away anyone who had dared to put up an estimate beforehand and share markets have responded positively, as they would.
But, report economists at Westpac today, investors better not get too carried away. If anything, Westpac's own surveys into sentiment and intentions among Australian consumers is showing a more moderate picture.
Reports Westpac: “Australian consumers may have avoided the worst of the ‘great recession’ but they have still been profoundly affected by the events of 2008-09. The soft spending profile over most of the last year reflects, at least partly, a fundamental shift in their behaviour – namely a sustained swing to a more cautious, debt-averse attitude to their finances.”
This, say the economists, shows through clearly in the detail of the Westpac-Melbourne Institute Consumer Sentiment Survey. These surveys, conducted monthly, show a relatively subdued response to ‘family finances’ and ‘time to buy’ questions, as well as in results to ‘wisest place for savings’ questions. The latter questions, report the economists, tend to show a much stronger inclination towards paying down debt.
While this caution has eased in recent months, Westpac economists still expect it to remain a major restraint on spending. A more conservative consumer, more averse to debt means the spending recovery will be more restained than usual and track incomes more closely, they add.
Mind you, all of the above should still allow for spending growth of 3% but it also means we are unlikely to see 4% or higher growth rates sustained as in previous expansions, say the economists. They add a return to the low-saving, housing-equity-withdrawal-boosted growth of the previous 15 years is even more unlikely.
Note that Westpac still expects consumer spending to step up from levels in the second quarter.
