Wednesday, 14 July 2010

How do confident consumers vote?

The Westpac–Melbourne Institute Consumer sentiment index out this morning suggests that Australians are starting to feel quite good again about their financial prospects. The index has risen to its highest level in 13 months, which surprised Westpac’s chief economist Bill Evans. ”We saw a comparable surge in confidence in 2009 when households realised that Australia had avoided recession but at that time the index was recovering from a much lower level.”
The improving sentiment will no doubt increase the confidence of the Labor government about its re-election chances, especially with the economic update to be given by Treasurer Wayne Swan later today providing further good news. The one doubt must be that behind people felling better about their prospects are the two months without any further interest rate rises. Perversely it is good news, rather than bad, that will encourage the Reserve Bank to move rates upwards again.
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