In recent months, commentators and economists have pointed to a divergence between consumer sentiment and business confidence in Australia. Most have put the difference down to a lack of wages growth. Low wages growth is good for business in keeping costs down. However, households’ propensity to spend is hampered. Other explanations, such as households’ debt levels and the threat of higher mortgage rates have also been put forward.
The latest survey of consumer confidence may be the beginning of an alignment of the business and household sectors. According to the latest Westpac-Melbourne Institute Consumer Sentiment Index, households were more optimistic than a month ago as the Index reading jumped from 99.7 in November to 103.3 in December. Any reading below 100 indicates the number of consumers who are pessimistic is greater than the number of consumers who are optimistic. The long-term average reading is just over 101.
