Coronavirus: ‘Extraordinary’ consumer confidence boosts outlook for strong recovery

Consumers were ‘extraordinarily confident’ in February despite a summer of COVID-19 outbreaks and the looming end of JobKeeper.

The consumer mood in Victoria is at its second highest in a decade, Westpac’s consumer sentiment survey has revealed. Picture: Daniel Pockett

Consumers were “extraordinarily confident” in February, buoying hopes that Australians will feel comfortable drawing down on tens of billions in precautionary savings to help drive the economic recovery in 2021.

The latest Westpac-Melbourne Institute consumer sentiment index lifted by 1.9 per cent from 107 points in January to 109.1 points in February, just shy of the 10-year high of 112 recorded in December.

The sentiment gauge was 14 per cent higher than a year earlier.

Westpac chief economist Bill Evans said “the consumer remains extraordinarily confident”.

With the March 28 expiry date for the JobKeeper program looming, the Morrison government is counting on Australians to keep spending beyond the withdrawal of emergency income support.

“High confidence amongst consumers is critically important for the economy at this juncture,” Mr Evans said. “It is vital that households, which have built up a very large financial buffer through the pandemic, are prepared to now use that buffer to partially offset the impact on the economy of the withdrawal of support programs”.

The strongest rise was in the “economic conditions next 12 months” sub‑index, which posted a solid 6.9 per cent increase. The survey was conducted after the Reserve Bank committed a further $100bn to bolster the economy.

Commonwealth Bank head of Australian economics Gareth Aird said the message from the February survey was “loud and clear”.

“Households remain very confident in the economic outlook, and this bodes well for the continued recovery,” he said.

While the national picture was brighter, the Westpac survey revealed about an 8 per cent drop in the sentiment gauges for Queensland and Western Australia in February. After a lengthy period of no community transmission of the virus, Brisbane and Perth endured short, sharp lockdowns in January.

In contrast, Victorians were buoyed by their success in managing the summer’s outbreaks, as shown by a 4 per cent lift in the consumer confidence index to the second highest level in a decade, making the state’s residents the most optimistic among the jurisdictions in March.

It was a similar story in NSW, where consumer confidence lifted by 3.5 per cent to a touch below its southern neighbour.

Mr Evans said there was “no doubt the management of the pandemic locally has had a constructive effect on confidence”.

Sentiment among 18 to 24-year-olds was 2.3 per cent below a year earlier, whereas in the 25 to 44 age group it was up by more than 20 per cent. In the over-45s, it ­ increased by 14 per cent.

Mr Evans said the emergence of a vaccine could help explain the divergence, because older Australians could expect to benefit more from a COVID-19 jab.