Australian Household Sentiment Soars as Optimists Now Majority

Australian household sentiment soared in October, marking a second straight month of above 10% gains, as success in containing Covid-19 combines with budget stimulus and expectations of further central bank easing

The consumer confidence index surged 11.9% in October to 105 points, after soaring 18% in September, Westpac Banking Corp. said in a statement Wednesday. That’s the highest since July 2018 and the first time above 100 — denoting optimists exceeding pessimists — since the middle of last year.

“This is an extraordinary result. The index has now lifted by 32% over the last two months,” said Bill Evans, chief economist at Westpac, noting confidence lifted in all states. “The budget and the outlook for interest rates have given a clear boost to the confidence of homeowners. Respondents with a mortgage saw their confidence lift by 12.7% while those who fully own their homes lifted by 13.5%.”

Australia’s government last week released a fiscal blueprint that pushed debt and deficit to a peacetime record just hours after the central bank signaled a willingness to ease further. Treasurer Josh Frydenberg has shelved the right-leaning government’s traditional fiscal rectitude as he tries to extricate the economy from its first recession in almost three decades.

Australia’s rapid containment of the virus and early re-opening of its economy has been disrupted by the renewed outbreak, with Melbourne’s 5 million residents forced into a hard lockdown that included a curfew. The central bank estimates the hit from Victoria, which accounts for about 25% of gross domestic product, is likely to offset the expansion in the rest of the country in the current quarter.

“The most striking improvements were around the outlook for the economy, Evans said, noting the “economy next 12 months” sub-index jumped 24% while the “economy next 5 years” sub-index was up by 14%.

The survey of 1,200 people was conducted from Oct. 5-10. The government’s budget and central bank’s latest policy statement were released on Oct. 6.

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