The latest Westpac-Melbourne Institute sentiment index showed that consumer sentiment has increased by 6.2 per cent to 118.8 points in April, with 100 points the difference between an optimistic and pessimistic outlook.
Westpac’s chief economist, Bill Evans, described the result as “extraordinary”, noting he expected consumer confidence to fall in line with recent events.
“The survey was conducted in the week following the unwinding of the JobKeeper program,” Mr Evans said.
“Initial fears that this and associated job losses would undermine confidence have proven to be unfounded.
“Secondly, there has been disappointing progress on the vaccine rollout locally. Compounding this was new advice against giving those aged under 50 the AstraZeneca vaccine due to risks of rare but serious side effects. Yet households appear to be resilient.”
According to the chief economist, a strong labour market has been the catalyst for this positive consumer outlook.
“Job vacancies were reported to be 27 per cent above the pre-COVID level in February last year, while the February labour force update showed the unemployment rate had fallen from 6.3 to 5.8 per cent, with employment increasing by a stunning 89,000,” the chief economist explained.
He also pointed to ending lockdowns and the associated upswings of workers in the recreation and hospitality sectors, with workers in these sectors showing big sentiment gains of 23 and 14 per cent, respectively.
“This result is particularly pertinent given that the unwinding of JobKeeper was expected to disproportionately impact recreation and hospitality,” Mr Evans said.
Victoria led the way with consumer confidence gains, with the state continuing to benefit from increased freedoms after its latest “mini-lockdown”.
Rising house and strong auction clearance rates are also buoying consumer confidence; however, affordability issues are creating headwind issues.
“Housing affordability appears to be weighing on home buyer sentiment. Big-ticket item spending intentions are not nearly as buoyant as the overall index, and confidence in the jobs market appears to have plateaued,” Mr Evans concluded.