Australian Consumer Confidence Growing

Confidence is growing and it is being driven by record vehicle sales, according to the Westpac / Melbourne Institute Index of Consumer Confidence, which rose by 0.6% in January. It recorded sharper increases in Western Australia, Queensland and South Australia and also reported decent gains in Victoria and New South Wales. Total lending finance dropped by 4% in November after a 2.4% increase in October. Lending is currently 3.5% lower than it was a year ago.

The Westpac / Melbourne Institute’s Index of Consumer Sentiment is released on a monthly basis and has been in existence since 1973. Consumers who are considered confident are also more likely to spend more so this index is a useful way of gauging the state of health of the economy.

December saw new car sales increase by 2.2% following a 0.2% increase in November. 1.11 million new cars were sold during 2012, with SUV sales striking a record of 305,825. Seasonally adjusted consumer confidence has been quite stable even though it equates to a year on year increase of 4%. Unadjusted consumer confidence was up by 5% and all states recorded significant gains. Queensland saw an increase of nearly 10% with Western and South Australia following closely. Analysts say that even a little change is a good sign and is an indication that the economy looks positive for the year ahead.

The 18 to 24 year old age group showed the least confidence out of all demographics and pulled the index down.

Lending finance overall is lower than it was a year ago but personal finance and home loans reported gains in November. Any further rate cuts granted by the RBA are expected to improve conditions.

Perhaps one of the most motivating pieces of recent financial news is a 2.2% increase in the sale of new vehicles over December. The strength of the local currency coupled with manufacturer discounts has lowered prices and made new cars more affordable. Affordability in the car market is also reported to have reached its most impressive level since the 70s and consumers appear to have taken notice. What’s driving new car sales are four wheel drives and sports utility vehicles which increased in sales by 17% in December, when compared to 12 months ago. One in every three cars sold down under is an SUV. Analysts are positive about the future progress of the car market, as long as the growth patterns can be sustained.

Only two out of the five Westpac/Melbourne Institute Index of Consumer Confidence components dropped in January. The approximate family finances were down by 8.6% compared to last year while the estimates for family finance over the next 12 months dropped by 1.2%. beyond those the outlook for economic conditions in the next 12 months increased by 2.7% and economic conditions over the next five years increased by 3.3%. The number of people who thought now was a good time to buy a home also increased by 4.7%.

Queensland showed the biggest growth in consumer confidence at 9.8%, followed by Western Australia with 7.1%, South Australia with 7% and New South Wales and Victoria, each with 4.5% growth rates. Interestingly men were found to be more optimistic than women (6.3% vs. 4.8%).

Confidence rose by 1.3% among tenants and by 14.5 for owner occupiers. Confidence among people paying their home loans off remained unchanged.

Commitments for lending, including personal loans, home loans and commercial and lease finance, dropped 4% in November following a 2.4% increase in October. This is because Aussies expect banks to still withhold the full implementation of the RBA’s latest cash rate cut; they are advised to do their homework, as affordable deals are becoming more and more accessible online.

Finance for housing saw a 0.5% increase in November following a 1% increase in October. Housing finance is currently 2.9% higher than it was a year ago.