We're in the money: consumer confidence hits new highs
Six near-consecutive interest rate cuts and a sharemarket that has been climbing since December have broken the back of consumer gloom, propelling confidence to heights not seen for years.
The March Westpac Melbourne Institute consumer sentiment survey recorded 110.5 on a scale where 100 means optimists merely balance pessimists.
It is the first time the index has breached 110 since December 2010.
On the all-important question of whether now is a good time to buy a house the confidence reading surged to a 3-year high of 144. An extraordinary 60 per cent of consumers surveyed believe that now is a good time to buy a dwelling. Only 16 per cent think it is not.
"Sentiment about house purchases usually leads building approvals by around 12 months," ANZ economic analyst Savita Singh said. "This points to a recovery in dwelling investment."
Otherwise lacklustre housing finance approval figures released on Wednesday show a rise in approvals for investors of 4.4 per cent in January, offsetting a dip of 2 per cent in December. Approvals for investors are up 19 per cent over the year.
An impressive 56 per cent of those surveyed thought now was a good time to buy a car, compared with 14 per cent who thought the time was bad.
"Consumers would have been buoyed by the positive run on markets," Westpac chief economist Bill Evans said. "The sharemarket rose a further 3 per cent between February and March to be up 10 per cent for the year and 20 per cent from its September low."
Asked whether the sharemarket was a wise place to hold savings, 8.6 per cent felt it was, up from 5.4 per cent a year earlier. Of real estate, 21 per cent said it was a wise place for savings, up from 19 per cent.
Those believing "paying down debt" was the best use for savings fell from 23 per cent to 18 per cent.
All but one of the questions asked by the Melbourne Institute drew clearly positive responses. The index for Australians expecting better family finances in the year ahead rose to 108 from 99 a year before. The index for Australians expecting a better economy in the year ahead was up from 89 to 110. The index for expecting better conditions over the next five years climbed from 93 to 107.
"These are strong results," Mr Evans said. "Despite the run of interest rate cuts to December 2012 the index averaged only a modest 98. What we are now seeing is the accumulation of those cuts genuinely boosting confidence."
The only index not above 100 referred to family finances over the past year. It rose from 76 to 87.