Rising house prices are lifting consumer confidence, but the positive sentiment is not an even spread across all households.
The monthly ANZ-Roy Morgan Consumer Confidence Index was up 9 points for October to 109, which is well down on the index’s historical average of 120, but an improvement from the record lows it sunk to in April and May.
A net 28 percent of people expected to be better off financially this time next year, up 6 points on last month, while a net 11 percent thought it was a good time to buy a major household item – up 12 points.
ANZ chief economist Sharon Zollner said as a general rule, booming house prices were good for confidence and spending.
“But of course the relationship isn’t unambiguous and it’s certainly not the same for everyone.
“So what we saw in our survey was that younger people – while they tend to be pretty upbeat on average – their confidence is a lot lower than a year ago, whereas for older people that’s not so much the case because of course older people tend to be homeowners.”
Zollner said the correlation between house price inflation and consumer confidence used to be very reliable, but was now less-so.
“Since about 2013 and 2014 it actually flipped the other way around for a while, so it’s no longer a given that rising house prices will make people more willing to spend.
“But what we are seeing is that both the consumer and business sentiment indicators bounced back quite a lot and probably housing does, on balance, have quite a bit to do with that.”
She said the single-most useful indicator out of the survey was the portion of consumers who believed now was the right time to buy a major household item.
“In recent months, consumers have been saying ‘no, it’s not a good time’… and they’re still saying that although it has jumped a little bit, because things are still so uncertain.
“But the anecdotes and the high-frequency data shows us that people have been spending… but maybe the data is pointing to longer-term challenges for retail.”
She said there were still some tough months to come.
“Business and consumer confidence indicators have had a very similar evolution this year – a sharp fall, then a bounce back, a bit of a wobble, and then a sense that actually we’re doing okay.
“But the tourism hit is very seasonal so we’re really only at the beginning of feeling that, plus the wage subsidy is rolling off now.”