Australian consumer sentiment jumps

Wednesday 8th July 2009

Australian consumer confidence climbed to a 19 month high while home-loan approvals rose, suggesting the government’s fiscal stimulus measures and low borrowing costs are helping underpin an economy that has managed to avoid recession.

Westpac Banking Corp. -Melbourne Institute sentiment index rose 9.3% to 109.4 this month, the highest since December 2007. Figures from the Australian Bureau of Statistics today showed the number of home-loan approvals rose 2.2% in May, the eighth straight monthly gain.

Prime Minister Kevin Rudd’s administration is spending A$22 billion on infrastructure projects including roads and schools and has doled out A$12 billion in grants to households and families.

Yesterday, the central bank kept its benchmark interest rate unchanged at 3% and said stimulatory fiscal policy and the impact of low borrowing costs will help underpin an economy that has so far skirted recession.

“The stand out force must be the huge financial handouts introduced by the government to counter the global financial crisis,” said Bill Evans, Westpac’s chief economist. “The lift in confidence appears to have spread to the housing market,” he said.

Consumer sentiment rounded out a two-month gain of 23.2%, the biggest since the survey began in 1975.

The Australian economy expanded 0.4% in the first quarter, avoiding a technical recession and putting in a small camp with India and China and economies that have continued to grow.

Still, Westpac predicts the economy contracted again in the second quarter, reigniting recession fears.

Home-loan demand has jumped with a rise in government grants for first-home buyers, helping people come up with the deposit to buy a property. First-home buyers made up a record 29.5% of loan approvals in May.

Businesswire.co.nz

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