Consumer confidence surges: survey

Consumer confidence surged in January as more people found jobs and household
budgets comfortably absorbed three interest rate rises, economists say.
The Westpac-Melbourne Institute index of consumer sentiment increased by 5.6 per
cent to 120.1 points in January, from 113.8 in December.

The strong result, from the survey of 1200 people carried out between January 11 and
January 17, follows slides in confidence in November and December.
ICAP senior economist Adam Carr said the confidence boost was due to "jobs, jobs and
jobs".
The national unemployment rate was a seasonally adjusted 5.5 per cent in December,
showing the economy had turned the corner, he said.
It also was lower than a downwardly revised 5.6 per cent in November, according to
figures from the Australian Bureau of Statistics (ABS) released earlier this month.
"The market has turned extremely quickly," Mr Carr said.
"At the end of the day, if you have an employed consumer, you have a happy consumer."
Mortgage rates were still historically "very low" and would not become restrictive
until rates rose further, he said.
"So there is really no reason to see a dent in consumer confidence.
"All you can say for sure is that the outlook for consumption is very good."
Mr Carr predicted the December quarter figures would show very robust spending.
The Westpac-Melbourne Institute survey showed four of the five components of the
index increased in January.
Sentiment over family finances compared to a year ago rose by 5.2 per cent and
expectations about family finances over the next 12 months increased by 10.5 per
cent.
Expectations of economic conditions over the next 12 months rose by 6.8 per cent
while expectations for economic conditions over the next five years fell by 2.1 per
cent.
Opinions on whether it is a good time to buy a major household item rose by 7.7 per
cent.
Westpac chief economist Bill Evans described it as a "very strong result" and said
the seasonally adjusted index took into account traditional January optimism.
"Nevertheless, it is still above its level of last September prior to the Reserve
Bank's record three consecutive rate increases over the three months from October to
December," Mr Evans said in a statement.
"In other convincing evidence that households appear to have comfortably absorbed
the higher interest rates, we note that the confidence of those respondents who
currently hold a mortgage has reached its highest level since 1994 when we first
collected data using categories defined by home ownership."
Mr Evans said that, while these categories of the index were not seasonally
adjusted, confidence of respondents with a mortgage was up 16.7 per cent in January
compared to the average rise in January of 8.6 per cent.
"With no meeting of the Board of the Reserve Bank in January, the record run of
three consecutive monthly increases in interest rates was interrupted."
He said recent trends in retail sales and the labour market suggested that the
Reserve Bank of Australia (RBA) would feel the need to lift interest rates by 0.25
per cent on February 2.
Nomura Australia chief economist Steven Roberts agreed that jobs growth had pushed
the consumer confidence index higher, but said he had been surprised by the strong
result.
"It was mostly the jobs data and particularly the unemployment rate coming down," Mr
Roberts said.
"It shows a very muted response so far to the RBA's rate hikes."
It was still likely the RBA would pause with interest rate rises after lifting rates
in February, he said.
Also on Wednesday, the Commonwealth Bank (CBA) said its Business Sales Indicator
rose by 0.3 per cent in December compared to a 0.4 per cent rise in November.
CommSec economist Savanth Sebastian said the slowing pace of sales came after three
consecutive monthly interest rises by the Reserve Bank of Australia (RBA) in the
final quarter of 2009.
"There were a couple of weak weeks in December and then we had discounting by
retailers and that would have flown through in the results," he told AAP.
"In terms of the overall impact, it seems that the rate hikes were having an impact
in terms of consumer spending."