Consumer confidence leaps as hopes turn to Christmas

Fewer restrictions, lower rates and hopes for ‘normal’ Christmas have helped lift consumer confidence to its highest level since 2013.

Shoppers in Melbourne’s Bourke St. Mall last week. Picture: Ian Currie

Australian consumer confidence surged to a 7-year high in November.

The Westpac-Melbourne Institute Consumer Sentiment index rose by 2.5 points to 107.7 points, the highest since November 2013.

Westpac chief economist Bill Evans said the most important developments since last month had been the significant unwinding of restrictions across Victoria and the reopening of the Victoria-NSW border.

The survey was conducted over the period of November 2 to November 8, before the second round of easing restrictions had been announced for Melbourne, but Mr Evans noted that with Victoria’s stunning recent success in containing the virus, expectations for this second round were buoyant.

The survey also preceded the recent encouraging developments around Pfizer’s coronavirus vaccine, which are also expected to have a positive impact on confidence.

“During the survey week the Reserve Bank announced further interest rate cuts,” Mr Evans said. “While relatively modest, the cuts came with a commitment to keep rates on hold for at least three years.

Subsequently, banks have further reduced the rates on fixed rate mortgages – some going below the psychologically uplifting rate of 2 per cent.”

He also notes that for 2020, 11.5 per cent of people expected to spend more and 32.3 per cent expected to spend less for Christmas.

“Over the full history the average net balance (proportion planning to spend more minus proportion planning to spend less) has been -20.9 per cent with a high of -12.7 per cent recorded in 2015 and a low of -26.1 per cent in 2014.

“For 2020 the net balance is -20.8% – around the long run average since 2009. Given the high degree of uncertainty this Christmas, and the headwinds from the high unemployment rate it is a very encouraging sign, that Australians are planning for a ‘normal’ Christmas.”