(Australian Associated Press)
Malcolm Turnbull’s ascent to the Prime Ministership has given consumers reason to smile, with the Christmas spending outlook at a seven-year high.
The Westpac/Melbourne Institute index shows consumer sentiment rose by 3.9 per cent in November to 101.7 points, lifting above 100 points and indicating there are now more optimists about the economy than pessimists.
Westpac chief economist Bill Evans said that apart from the brief surge in confidence following last May’s budget, this is the highest print for the Index since January 2014.
“This is a cracking result,” he said.
“The increase also comes despite the banks’ decisions to raise mortgage rates for both owner occupiers and investors.”
Most surprisingly, the confidence of respondents who hold a mortgage increased by 4.1 per cent – a larger lift than the rise in the overall Index.
Consumers’ assessments of their personal finances, however, were presumably linked to the interest rate hikes and fell on average by 5.7 per cent, Mr Evans said.
Meanwhile, the outlook for the economy was most likely boosted by confidence towards the economic credentials of the new leadership team and jumped on average by 15 per cent.
November is only the third month out of the last 21 that optimists have outnumbered pessimists.
An encouraging sign for retailers in the leadup to the holiday season was the measure of whether consumers plan to spend more, less or about the same on Christmas gifts compared to last year, Mr Evans said.
The proportion planning to spend more was 16.9 per cent, compared to the seven-year average of 12.5 per cent.
And those expecting to spend less made up 29.6 per cent, compared to the average of 34.7 per cent.
“(It’s) the most positive mix of Christmas spending plans since we began running this special question in 2009,” he said.
Australian shoppers are tipped to spend $46.7 billion in retail stores over the Christmas trading period, 3.6 per cent more than last year, according to The Australian Retailers Association and Roy Morgan Research.
Mr Evans said the lift in spending expectations and confidence around the employment outlook will allow the Reserve Bank to sit on the interest rate sidelines through to next year.
“It is our current view that the growth dynamics of the Australian economy will remain sufficiently supportive through 2016 to ensure steady rates,” he said.