Asia Times: Aussie consumer confidence rises to 5-year high



	February 18, 1999	atimes.com

Oceania

Aussie consumer confidence rises to 5-year high

SYDNEY - Australian consumer confidence has soared to its highest level in five years, according to a private sector indicator.

The Westpac Banking Corp/Melbourne Institute consumer sentiment index rose by 3.1 percent in February to 116.6 from 113.1 in January, in seasonally adjusted terms.Westpac's general manager economics Bill Evans said confidence is at its best level since 1994.

''This rise follows the sharp 8.3 percent rise in January, and the combined two month jump in confidence is the largest since October/November 1993, which coincided with the announcement of Sydney's successful bid for the Olympic Games,'' he said.

''That jump in 1993 confidence also followed the Reserve Bank's last rate cut in the interest rate cycle and preceded an exceptional growth spurt in 1994.''Four of the five components of the index increased, with the strongest growth reserved for consumers who expect economic conditions to improve over the next 12 months, the Melbourne Institute said of the survey conducted last week of 1,200 people.

The economic conditions component rose by 10.5 percent and is now up 21.9 percent on a year ago.

Consumers now rate the health of their financial positions close to the previous peaks recorded in 1978 and 1994, Mr Evans said. ''This may not only reflect low interest rates but also the increased wealth that consumers have achieved through the strong share market, various privatizations and the AMP demutualization."

Evans said Westpac had revised up its 1998/99 growth forecast on the back of ''this convincing evidence that consumer spending will maintain its current strong momentum.''Westpac now expects a growth pace of 4.2 percent in the year, up from an initial outlook for 3.8 percent growth.The bank also revised up sharply its 1999/2000 forecast to 3.5 percent from 2.3 percent.

''These forecasts are much higher than currently expected by other forecasting groups, including the government, which is currently forecasting 3.25 and 2.75 percent respectively for those two years,'' Evans said.

Westpac has also altered its outlook for interest rates.''We now expect that there will be no more interest rate cuts in 1999,'' said Evans.''The next probable move is likely to be a modest increase in the first quarter of 2000, when U.S. rates will be higher and inflationary pressures both domestically and offshore have increased."

The Melbourne Institute said there were signs of a persistent rise in consumer optimism given that the index has been on a ''steady increase since the trough in June last year."

(Asia Pulse)