Consumer confidence back near pre-coronavirus levels: Westpac

Consumer confidence has returned to close to pre-COVID levels, buoyed by Australia’s success in squashing the spread of the virus.

Consumers seem to believe that Australia will now avoid ‘worst case’ economic scenarios. Picture: Tim Carrafa

In a strong sign that the earlier than expected easing of restrictions will encourage a quicker economic recovery through the rest of the year, consumer confidence has returned to close to pre-COVID ­levels.

Westpac’s consumer sentiment index lifted 6 per cent to 94 points in June, from 88 points in May, recouping all of the 20 per cent collapse when the pandemic took off in March.

A reading of below 100 speaks to more pessimists than optimists among respondents, but it is only 2 per cent below the immediate ­period before the health crisis.

Treasury secretary Steven Kennedy on Tuesday made it clear that a return of confidence among households and businesses would be key to the economic recovery.

His comments followed a historic plunge in consumption over the March quarter, which will pale into comparison with the expected hit to spending over the three months to June.

Westpac chief economist Bill Evans said he expected the index to stabilise at current levels, given the still difficult and uncertain environment for many households.

“The general picture is of continued intense pressure on family finances and concern about the near-term outlook for the economy, but with firming optimism around prospects for finances in the year ahead and the economy’s medium-term outlook,” he said.

Despite confirmation the country is in the midst of its first recession in close to three decades, Australians no longer expect dooms­day economic scenarios in the immediate future, and are optimistic about prospects over the coming five years.

Household confidence in the economic outlook over the next 12 months climbed 8 per cent, although these were gains from very low levels: the near-term economic expectations subindex is at 77 — still lower than any reading since the global financial crisis.

The subindex measuring views on the economy over the next five years lifted 6 per cent in June to hit an 18-month high of 102.

 

The data came as CBA card figures showed Australians over the past three weeks had spent 3-5 per cent more than in comparative weeks in 2019, underlining that massive pick-up from the depths of the health crisis in early April, when weekly spending was down by a fifth against a year before.

The hit to consumption in April, the first full month of the most severe social distancing measures, was underlined by figures from the Australian Bureau of Statistics on Wednesday that showed a record 25 per cent plunge in the value of new personal loans, driven by a 38 per cent collapse in car loans.

 

CBA noted that spending data versus a year earlier would be “flattered” by increased use of cards as shops and shoppers shunned cash.

The Reserve Bank noted ATM withdrawals in April were 40 per cent lower than a year earlier.