Colin Brinsden, AAP Economics and Business Correspondent
(Australian Associated Press)
A prominent economist hopes the high levels of confidence being seen among Australians encourages them to spend savings built up during the pandemic when federal government stimulus measures end in March.
This includes the JobKeeper wage subsidy, which has been a key support measure during the COVID-19 pandemic and subsequent recession.
“High confidence amongst consumers is critically important for the economy at this juncture,” Westpac chief economist Bill Evans says.
The latest Westpac-Melbourne Institute consumer sentiment survey – a pointer to future household spending – shows optimists continue to have the upper hand over pessimists.
The consumer confidence index rose by 1.9 per cent in February, recouping around half the loss seen in January and leaving it just short of a 10-year high seen late last year.
Mr Evans said the survey released on Wednesday shows consumers remain “extraordinarily confident”.
“No doubt the management of the pandemic locally has had a constructive effect on confidence,” he said.
Last week’s commitment by the Reserve Bank of Australia to maintain support for the economy and consistent positive news on the jobs market would also have boosted confidence.
Economists at National Australia Bank have upgraded their economic forecasts based on its monthly business survey and the bank’s own transactions data.
They expect the economy grew by 2.5 per cent in the December quarter 2020 after the 3.3 per cent recovery in the previous three months – and by about four per cent over 2021, recovering to pre-pandemic levels by mid-year
“Consistent with that growth outcome, the labour market has also improved more strongly than previously expected,” they say.
They expect the unemployment rate to be six per cent by the end of this year compared with 6.6 per cent as of December, and around 5.4 per cent by the end of 2022. The rate was 5.1 per cent when the virus first struck.
However, separate figures show construction firms are struggling to pay their bills as the commercial building sector continues to suffer as a result of the pandemic – a potential worry for the broader economy.
Credit reporting agency CreditorWatch says payment times in the construction industry have jumped 47 per cent in the past year and now average 44 days compared to 35 days in December.
CreditorWatch CEO Patrick Coghlan said if the trend continued it could cause a multiplier effect across the economy and impact demand in manufacturing.
“Encouragingly, residential construction is booming thanks to government stimulus and low interest rates driving demand in the housing market,” Mr Coghlan said.
New home sales eased only slightly in January, having almost doubled compared to a year earlier the previous month, when home buyers rushed to secure the full benefit of the federal government’s $25,000 HomeBulider grant.
While the HomeBuilder scheme as been extended to March, grants have been reduced to $15,000.
The Housing Industry Association said new home sales were 12.1 per cent lower in January compared to 12 months earlier.
“This is still an encouraging result given the nature of the market in January … and indicates that there will remain ongoing demand for new homes beyond the HomeBuilder scheme,” HIA chief economist Tim Reardon.