Ross Greenwood speaks to Senior Economist with Westpac (ASX:WBC) , Matthew Hassan, about the consumer confidence index has jumped to its highest level in four years.
Introduction: Are you a confident consumer? The analysis says so
Ross Greenwood: Good news we’re more confident or maybe we are, I’m not sure. Let’s try and find out now, because it would appear as though consumer confidence index, the number that’s brought out by WestPac in Melvin Institute has jumped to its highest level in four years, since 2016, but does that actually mean we are all increasingly confident.
It was interesting to note that Dr. Phillip Low, we’ll talk about this a little bit later or the program, has also been out today talking about why is it that wages are so low and why it would cause us to be confident, at a time when the unemployment rate is also relatively low.
He explains that by saying there’s a whole bunch of part-time workers who would actually prefer to have more work if they could find it. In other words there’s under-utilization in our workforce.
Let’s go to Westpac’s Senior Economist, Matthew Hassan, who is on the line right now. Matthew, many thanks for your time.
Interview with: Matthew Hassan, Senior Economist, Westpac
Matthew Hassan: You’re welcome.
Ross Greenwood: Do you believe these numbers that the consumer confidence, the feelgood factor, if you like, of consumers is on the pick up?
Matthew Hassan: Yes, it’s better than it was, we’re slightly optimistic. We’re above the gainline again, over the 100 level, but it’s a far cry from what I would call strongly optimistic. Prior to the GSC you get readings in the 105, 110 range, for the consumer index.
Today’s update was 102, we’re over 100, but we’re still a long way short of those levels that are associated with a real consumer that’s got a swing in its step. There’s still evidence that those concerns around wages are still dragging on household income.
Now, where the confidence is strongest is t around the expectations for the economy and that’s been evident since the start of the year really. It got a bit of a kick along with the federal budget, but around family finances are not as upbeat, they’re still on a negative side.
Ross Greenwood: But isn’t there a real weird dichotomy here, because business confidence is very strong, business conditions are very strong, and yet consumers, their attitude is very weak, so it’s a bit unusual, because one side says, businesses says, look life’s okay at the moment and households are saying, no, times are tough. It doesn’t work.
Matthew Hassan: It is very unusual. It’s very unusual to see business confidence so far ahead of the consumer, and it really does highlight the way the Australian consumers are very much the weak link in the economic story, so far.
We’ve seen business conditions pick up, confidence is lifted, investment is lifted, we’re seeing exports up, we’re seeing strong gains, in terms of jobs on the ground. Yet the consumer hasn’t really followed suite. We’re seeing some improvement in confidence, but not the pick up that you’d expect with an economy that’s performing the way it is more generally.
It warrants close monitoring, it’s telling us growth wise we’re not really out of the woods yet. You really do need a consumer to be part of the growth story, to ensure that you get, what we call self-sustaining momentum.
It’s all very well to get a lift in GDP growth, driven by exports and public demand, taking you back to 3% but you do need that lift to feed through to jobs, to feed through incomes and further spending, to give you more momentum down the track.
Ross Greenwood: There was one very interesting aspect of your numbers today that came out. Is that consumer confidence, the biggest lift, and it was sizable, was through respondents aged between 25 and and 44, in other words people who are mostly in the sweet spot of their careers.
Now, it would almost seemed to me was that those people are the ones more likely to be getting wage rises right now, and those people really feeling the pinch from, shall I say electricity prices, private health insurance, other things are rising in price very quickly.
Going to be those people are either on lower incomes or fixed incomes who are retirees or older, or very young people trying to get themselves established in the workforce.
Matthew Hassan: That’s right, you would expect them to be seeing a bit more of a pick up from the labor market conditions, seeing how those groups are a sweet spot. That does highlight some of the pressures though, if you will look at, across other segments, you do see the pick-up’s not nearly as significant.
We see evidence of not only utilities and other costs pressures also rising, petrol prices, I don’t know if you notice but they’ve jumped about 20 cents since March.
Ross Greenwood: That’s a real barometer as well. It’s going to its going to be interesting to see how this moves across the next couple of months and as for you, Matthew, Senior Economist at Westpac, how’s your consumer confidence at the moment?
Matthew Hassan: Bit so so myself.
Ross Greenwood: Really? Can I help out in any way?
Matthew Hassan: No, I think I’ll be all right.
Ross Greenwood: Buy you a beer, something like that? Make you happy, I don’t know. Anyway, Matthew Hassan, Senior Economist at Westpac on those consumer confidence numbers today, the best in four years but certainly not robust.
[00:05:03] [END OF AUDIO]
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