Australia Consumer Sentiment Surges In January

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Consumer confidence in Australia picked up in January undeterred by the Reserve Bank of Australia's three successive rate hikes, the latest report from Westpac Bank and Melbourne Institute showed on Wednesday.

The consumer confidence index climbed 5.6% to 120.1 in January from 113.8 in the previous month. A reading above 100 means that optimists outnumber pessimists.

Four of the five components of the confidence index increased in January. Assessments of family finances increased by 5.2% compared to a year ago, while consumer views on the household financial situation in the next 12 months surged 10.5%. Expectations for economic conditions in the next 12 months rose 6.8%. Opinions on whether it is a good time to buy a major household item grew 7.7%. However, assessments of economic conditions in the next 5 years fell 2.1%.

The latest consumer sentiment readings suggest that households have comfortably absorbed higher interest rates, said Westpac chief economist Bill Evans. Confidence of those respondents who currently hold a mortgage reached its highest level since 1994, he said, rising 16.7% in January compared to a January average of 8.6%. The absence of a further rate increase in January was clearly a major source of relief for consumers, he said.

The most important fillip to confidence, according to Evans, was the continuation of positive surprises on the employment situation. Last week it was reported that the national unemployment rate had surprisingly fallen to 5.5% in December from 5.6% in November. Other factors that supported sentiment in January include a rise in the share market, up 4.2% from the previous month, although petrol prices increased by a solid 4.4%.

With the sentiment index remaining strong, Evans expects the Reserve Bank of Australia to raise the benchmark interest rate by a further 25 basis points in the February 2 monetary policy meeting, likely followed by another two increases of 0.25% each by June.

Australia was the first major economy to raise interest rates since the onset of the global financial crisis. The country's economy has been shielded from the worst of the worldwide recession, thanks to continuing strong demand from China for its abundant mineral resources and active stimulus measures implemented on the domestic front.

Meanwhile, job vacancies for skilled workers in Australia increased 1.1% month-on-month in January in trend terms after the 1.6% rise in the previous month, the Department of Education, Employment and Workplace Relations reported.

Vacancies rose for two of the three occupational groups, DEEWR said. Vacancies among associate professionals and trades grew 0.1% and 3.9%, respectively, while that among professionals fell 5.7%.

Following the release of the consumer sentiment report, the Australian dollar stabilized against its major counterparts.

Consumer confidence in Australia picked up in January undeterred by the Reserve Bank of Australia's three successive rate hikes, the latest report from Westpac Bank and Melbourne Institute showed on Wednesday. (Market News Provided by RTTNews)