Sign Up
..... Connect Australia with the world.
Categories

Posted: 2022-12-13 05:36:42

Consumer confidence has picked up from near-record lows as people hope the Reserve Bank may not raise interest rates by as much as feared.

Westpac and the Melbourne Institute found consumer confidence increased slightly from November to December on optimism that the downturn in home prices was over. 

Consumer sentiment lifted by 3 per cent, from 78 last month to 80.3 this month, with households preoccupied by inflation and the state of the economy.  

There was a surprise lift in the outlook for house prices in the survey. 

The house price index jumped by more than one-quarter from 91.1 to 117.3, with the rise prominent across major housing markets. 

consumers
High inflation is weighing on consumer confidence.(Westpac: Supplied)

Home prices have fallen for seven months in a row, but the pace of decline slowed in November.

And fewer survey respondents (+50 per cent) expected official interest rates to rise by another 1 percentage point compared to November (+60 per cent) and July (+73 per cent).

The Reserve Bank raised official interest rates eight times from May to December. However it has slowed the pace of rises in recent months.

Westpac chief economist Bill Evan said lower interest rate expectations appeared to be a major reason for the increased confidence. 

"In the case of interest rates, there are even some signs that the news is becoming viewed as slightly less negative — consistent with the notion that the bulk of the interest rate tightening cycle is now behind us," Mr Evans said. 

"This idea may also be behind a notable recovery in confidence more generally amongst those respondents who hold a mortgage — up 11.3 per cent in the month compared to a 3.8 per cent rise for tenants and a 2.7 per cent fall amongst those who wholly own their property." 

Interest rates rise, but what about 2023?

Despite that and more confidence about family finances and keeping a job, people still thought it was a bad time to buy a home.

Westpac said the time to buy a dwelling index fell nearly 3 per cent, near its lows, and remained in a deeply pessimistic range, down 43 per cent from its peak in November. 

"Affordability is a key driver of this index," Mr Evans said. 

"The prospect of high prices is not always positive, particularly when interest rates are expected to move higher as well."

"The combination looks to be keeping homebuyer sentiment firmly in the doldrums."

Mr Evans said confidence was still near recession lows and pessimists still outnumbered optimists. 

"Despite this welcome lift, the level of the index remains comparable with the lows seen during the COVID pandemic and the global financial crisis," he said. 

"December's 3 per cent rise follows a disastrous 6.9 per cent drop in November that saw the index collapse to just 78 – one of the weakest reads recorded outside of a recession."

View More
  • 0 Comment(s)
Captcha Challenge
Reload Image
Type in the verification code above