During most of the period between 2014 and 2017 there was a divergence between consumer sentiment and business confidence in Australia. Some economists explained the difference by a lack of wage growth; low wage growth is good for business in keeping costs down and margins up but 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.
According to the latest Westpac-Melbourne Institute Consumer Sentiment Index, households’ levels of optimism improved slightly as the Index inched up from May’s reading of 101.8 to 102.1 in June. Any reading above 100 indicates the number of consumers who are optimistic is greater than the number of consumers who are pessimistic. The long-term average reading is just over 101.
