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.
After the Westpac-Melbourne Institute, December consumer survey was released, there was some talk of a possible alignment of the business and household sectors. The January survey provided some support to this line of thinking but recent reports have failed to narrow the gap.
According to the latest Westpac-Melbourne Institute Consumer Sentiment Index, households were slightly more optimistic than a month ago as the Index edged up from 102.7 in February to 103 in March. 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.
