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Confidence rises on employment numbers

ANZ-Roy Morgan Australian Consumer Confidence bounced 2.3% last week, following a 0.4% fall the previous week. The increase in confidence was driven primarily by an improvement in consumers’ views towards both current and future economic conditions.


  • Households’ views around current financial conditions rose 1.8% last week, entirely reversing the prior week’s fall. Views towards future conditions, though, were less positive, with the subindex slipping 1.1%. Both subindices currently sit above their long term averages.


  • Consumers’ views towards current economic conditions increased a sharp 7.9% last week, bringing the subindex to its highest point in 20 weeks. Views around future economic conditions rose less spectacularly, up 2.7%, more than offsetting the 1.6% decline in the previous week.


  • The ‘time to buy a major household item’ rose 1.8% last week, partially reversing the previous week’s 2.3% decline. This subindex remains well above its long term average.


  • Inflation expectations were unchanged at 4.3% on a four-week moving average basis, although the weekly value edged down to 4.2%.




    “The solid increase in confidence last week is very encouraging and likely reflects another good jobs report along with the RBA’s broadly positive assessment of domestic conditions in the minutes of the July board meeting. The somewhat confusing commentary around the level of the neutral cash rate appears not to have impacted.


    Consumers appear to have taken heart from the ongoing improvement in labour market conditions, in particular the large increases in full-time employment and hours worked. As the RBA has pointed out, a reduction in spare capacity has implications for wage growth and consequently for household spending. However, we believe that job insecurity and low inflation expectations also play a significant role in determining wage outcomes. As such we expect only a very modest pick-up in wage growth over the rest of the year and 2018.


    We expect labour market conditions to continue improving, although at a slower pace, now that the period of catch up between official and survey based measures is largely complete. We will be closely watching Governor Lowe’s speech and the CPI release out later this week for further insight into the RBA’s assessment of the labour market and the course for monetary policy.”


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