By Jason Cadden
(Australian Associated Press)
Consumer confidence has surged to its highest level since May’s federal budget but there are doubts shoppers will remain upbeat.
The Westpac/Melbourne Institute consumer confidence index jumped 7.8 per cent in August, following two consecutive months of falls.
Despite the gain, the August reading is below the 100 level where positive and negative survey responses are evenly balanced, and remains below its 20 year average.
Westpac chief economist Bill Evans said the large rise was “a very surprising result” usually associated with major events like federal budgets or interest rate changes.
Easing worries about Greek debt and Chinese stock market volatility, plus booming home prices, drove the rise, he said.
Confidence grew particularly among homeowners and those paying off a mortgage, Mr Evans said.
But he doesn’t see the boost in consumer confidence continuing.
“I expect that this current rally will equally prove to be unsustainable particularly given a resurgence of concerns around China and the evidence last week that the unemployment rate lifted to 6.3 per cent,” Mr Evans said.
Data from the Australian Bureau of Statistics on Wednesday showed annual wages growth of 2.3 per cent in the June quarter, the slowest rate on record for the second quarter in a row.
Weak wages and the impact on consumer spending will weigh on consumer confidence, AMP chief economist Shane Oliver said.
“While it’s a close call, another rate cut is still more likely than not I think,” he said.
“The combination of subdued consumer confidence and weak wages growth points to constrained consumer spending.
“Fortunately, wealth gains and low interest rates are providing a bit of a positive offset and helping drive reasonable retail sales growth.”
Commonwealth Bank economist Diana Mousina expects the housing boom will help boost retail spending as people fit out their new, or newly renovated, homes.
“Despite the weakness in consumer confidence over the past year, retail sales growth has held up,” she said.
“The housing boom is lifting spending on renovations related areas and a lower currency is shifting prior offshore spending back domestically, including both physical goods but also services.”