The Australian consumer seems determined to avoid thinking about recession.
Jobs perhaps worry them.
A rise of around 20,000 in the number of jobs lost is expected later today in the June labour force figures from the Australian Bureau of Statistics.
But that news will be hard pressed to offset the surge in consumer confidence to its highest level since December 2007, which was when the dark clouds of the credit crunch started building as the Centro Property trust group got into trouble, starting a series of similar problems in the following months.
As well housing finance approvals continue to rise, especially for owner occupied housing, thanks to the first home buyers’ grants with the amount lent and the proportion of all buyers hitting new record highs in May.
In fact the news from the housing finance figures probably carry more significance for the economy in the next year or so as the influence of new home buyers continues to grow.
There would seem to be a simple equation here: more confidence means more confidence to borrow, especially if you are a young couple looking for their first home. It means fewer fears about jobs.
So first home buyers hit a record proportion of nearly 30% of all home purchases in May, and the seasonally adjusted number of new owner occupied homes financed surged 8% in May to 6,334, the highest level since January 2002.
The amount of money lent for home building shows the influence of first home buyers: the $1.550 billion lent in may was a record; it was up 6.9% from April and more than 55% on November’s $998 million.
No wonder the Reserve Bank and the Government are confident that home building will help support the economy later this year and into 2010.
The Australian Bureau of Statistics said the number of finance commitments on owner-occupied houses in Australia rose 2.2% in May, seasonally adjusted, to 63,855.
Total housing finance by value rose by 2.3% in May, seasonally adjusted, to $22.678 billion. The rise was much more than the market’s expectations for a rise of 1.3% in the month.
First home buyer interest was again strong, rising from 28.6% in April to a record 29.5% in May 2009 of all commitments.
The ABS said the seasonally adjusted estimates increased in all states with the exception of Tasmania. Decreases were recorded for the Northern Territory and the Australian Capital Territory.
There was also a rise in the purchase of newly-built homes, up a solid 2.9% in May. Refinancing of existing loans edged up 0.9% in the month.
The gradual expansion of home building will help in small way to soak up some of the expected growth in unemployment over the next year.
The growth in housing and consumer confidence means the chances of another rate cut look a bit more remote.
But even if the jobless numbers worsen, it will have to be a significant fall, very quickly, to get the Reserve Bank to cut rates from the 3% level they sat on at Tuesday’s board meeting.
In fact the economy is right where the RBA would expect it to be, given the huge cuts in interest rates, lower oil prices and stimulus spending by the Federal Government since December.
Consumer confidence had plunged in 2008 as the markets worsened; the fall was exacerbated by the rise in petrol prices, the slowing in demand in retailing as a result and the surge in gloom and doom stories.
House prices came under pressure in some markets and the resources boom bubble was popped and jobs started being lost, especially in WA and Queensland.
The Bear Stearns problems in March and then the crunch in September when Lehman Brothers failed and more banks, brokers and other companies were bailed out, trembled or raced for the safety of government help, saw another fall in confidence.
But those days are well and truly behind us (for the time being, and forever, hopefully).
Consumer confidence jumped has risen to its highest level in 19 months on the belief that economy has averted a recession (in formal terms) for the time being.
The Westpac/Melbourne Institute survey showed a 9.3% rise in July from June to 109.4 points, the highest since December 2007.
The survey of 1,200 consumers was conducted between June 29 and last Sunday, July 5.
It follows a big rise in June. Westpac says the 23% jump in the index in June and July is the largest of its kind since the survey was started in 1975.
Westpac’s Chief economist, Bill Evans said in a statement that “This is unquestionably a stunning result. The main driver of sentiment “must be the huge financial handouts introduced by the government to counter the global financial crisis.”
Four of the five components in Westpac’s confidence index rose in July. Expectations for economic conditions over the next 12 months jumped 19.6% (a very strong reading), while assessments of family finances versus a year ago slipped 0.9%.
