Colin Brinsden, AAP Economics and Business Correspondent
(Australian Associated Press)
Australians appear to have surprisingly latched on to the Reserve Bank’s optimistic economic outlook despite COVID-19 lockdowns in many parts of the country.
The weekly ANZ-Roy Morgan consumer confidence index rose 2.5 per cent, recouping most of last week’s 3.1 per cent fall, suggesting optimists have the edge over pessimists.
Even more surprising, the survey found the ‘time to buy a major household item’ component gained five per cent – at a time when half of the population can only go out to buy essentials.
The minutes of the RBA’s August 3 board meeting, also released on Tuesday, emphasised its central scenario where once outbreaks are contained, the economy bounces back quickly.
“The vaccination program would assist with containment of the virus and longer-term economic recovery,” the minutes said.
“Although uncertainty had increased, the central scenario was still that the Australian economy would grow strongly again next year.”
RBA governor Philip Lowe was equally optimistic when he faced federal politicians just days after that meeting.
However, Westpac chief economist Bill Evans points out the near-term outlook has deteriorated significantly since that board meeting.
In the past few days alone, the NSW government has broadened its virus lockdown to the entire state and Victoria has extended its sixth lockdown to September 2, which includes a nightly curfew.
The ACT has also extended its restrictions to the same date and Greater Darwin and Katherine have entered a three-day shutdown.
“Despite the current resilience in sentiment, the persistence of the highly infectious Delta variant means there is significant uncertainty about how things will evolve over the next few weeks,” ANZ head of Australian economics David Plank said.
Mr Evans said at the August 3 meeting the board was advised the economy could contract by at least one percentage point in the September quarter, compared with Westpac’s estimate for a 2.2 per cent decline.
“We have recently revised down the growth outlook further,” Mr Evans said.
He now expects a contraction of 2.6 per cent in the September quarter.
Commonwealth Bank economists reported customer card spending fell by five percentage points over the week to August 13.
“Australia’s economic recovery from last year’s COVID restrictions was impressive,” CBA chief economist Stephen Halmarick said.
“However, all this has changed. Rolling lockdowns in many states and the extended lockdown in Greater Sydney had impacted most areas of spending.”
Still, another report shows many households were feeling comfortable with their financial position heading into Australia’s third-wave outbreak.
The twice-yearly ME household financial comfort index increased three per cent to 6.04 points out of 10 during the past six months to June.
This is five per cent higher than a year earlier and eight per cent above its December 2019 level.
ME’s consulting economist Jeff Oughton said several factors have bolstered households’ sense of wealth and comfort with their finances.
“These include rising investments such as the property market, slightly higher average incomes in a rebounding job market and more conservative spending and savings behaviour,” Mr Oughton said.