Consumer confidence launches after Budget

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By Leith van Onselen

The ANZ-Roy Morgan Research consumer confidence index has rebounded strongly following last week’s Budget, jumping by 4.0 points to 114.0 in the week ended 17 May, to be tracking above the long-run average of 113 (see next chart).

ScreenHunter_7350 May. 19 10.08

According to ANZ chief economist, Warren Hogan:

“The initial positive reaction of Australians to last week’s budget is great news for the economic outlook”…

“This suggests to us that Australians believe the government has got the mix of medium-term fiscal consolidation and short-term support for the economy about right”…

[Nevertheless] we expect that job security will remain front and centre for Australians in their assessments of not just their own financial situation, but also the outlook for the economy. As such, the unemployment rate will be critical to prospects for sentiment, spending and the economic outlook

Personally, I view this bounce as nothing more than a temporary Budget sugar hit that will retrace over coming weeks and months. It’s not as if the economic outlook has changed. The massive mining capex unwind is still ahead, along with the shuttering on the local car industry.

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Regardless, the below chart plots the most recent Westpac-Melbourne Institute Consumer Sentiment index against the latest ANZ-RM Consumer Confidence index:

ScreenHunter_7351 May. 19 10.08

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.