Matthew Hassan, Research Analyst at Westpac, notes that Australia’s Westpac Melbourne Institute Index of Consumer Sentiment rose 3.9% to 106.1 in July from 102.1 in June.
Key Quotes
“The consumer mood showed a clear improvement in July.”
“This is the eighth month in which the Index has been above 100, indicating optimists outnumber pessimists, a clear turnaround on the previous year in which 11 out of 12 readings were below 100.”
“Despite the positive run, the overall level of sentiment is still not that strong – at 106.1, the July reading compares favourably to recent years but is still below the 108.3 average recorded over the ten years prior to the GFC, and peaks well above the 110 mark.”
“The survey detail shows the latest lift in sentiment is being driven by growing optimism about the economy.”
“Some of this lift likely reflects developments around tax policy with the Government’s multi-year tax cut package passing into legislation in June and the first round of relief coming into effect on July 1.”
“The Reserve Bank Board next meets on August 7. The Governor has made it plain in recent comments that the official cash rate is unlikely to be changed any time soon. While the improved tone to sentiment this month will be a welcome shift given the Bank’s concerns about an uncertain outlook for the Australian consumer, the detail will be less comforting with family finances still under pressure, what had been a steady improvement in labour market expectations stalling, and further signs of weakness in housing-related sentiment. All up, a lift in consumer demand still looks unlikely near term.”
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