9 Jul 2009

Big jump in consumer confidence in Australia

7:02 am on 9 July 2009

Consumer confidence in Australia is up by a record amount.

The last time the Westpac-Melbourne Institute Consumer Sentiment Index bounced so strongly over a two-month period was when Australia was coming out of recession in 1992.

Back then it rose 18.8%, but it has done much better in the two months since the last reading in May - rising by 23.2%.

The ABC reports the index was up 9.3% this month to reach a total of 109.4, meaning that those optimistic about the economy decisively outweigh pessimists for the first time since December 2007. The survey began in 1975.

Westpac chief economist Bill Evans says the avoidance of a technical recession, as well as cash handouts by the the Government, are probably the key drivers of the optimism. He describes the rise as stunning.

There was also a steep rise in the number of people who think that it is a good time to buy household items.

Recession avoided

Australia has narrowly avoided entering a technical recession, measured by two straight quarters of negative growth.

Housing investment keeps picking up, with another rise in the number of home loans.

Official figures showed a 2.3% increase in the value of home loans taken out during May, with a slightly higher increase of 2.4% in the value of loans for investment properties.

However, Mr Evans believes that some of this optimism may be premature, as unemployment rates are currently 1.4 percentage points higher (at 5.7%) than they were in late 2007.