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Australia: New Federal Budget drives consumer sentiment back into optimistic territory

Christian Fernsby |
The Westpac-Melbourne Institute consumer sentiment index rose to 100.7 in April from 99.8 in March, which had marked the worst reading in one year and a half.

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Therefore, it returned to above the 100-point mark that separates optimism from pessimism among consumers, as the measures contained in the newly released 2019 Federal Budget were well received by households.

April’s increase clearly reflects an improvement in the forward-looking components of the index, which are more visibly affected by the tax relief measures included in the Federal Budget.

Consumers’ general economic outlook on the next 12 months surged, as did and their expectations of economic conditions in the next five years.

Moreover, their expectations of their finances in the next 12 months improved significantly, and their concerns regarding future job losses eased.

Further good news came from the housing indicators: following a notable correction in real estate prices, buyer sentiment rose, while house prices expectations rebounded strongly—signaling consumers are starting expect in a moderation of the price correction.

On the other hand, continued sluggish wage growth, lower property prices and the high stock of debt continued to weigh on consumers’ sentiment as indicated by a further deterioration in consumers’ assessments of their family finances compared to a year ago, as well as a decline in the number of consumers saying it is a good time to buy a major household item.

FocusEconomics Consensus Forecast panelists see private consumption growing 2.5% in 2019, which is unchanged from last month’s forecast, and 2.5% again in 2020.

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