Prospects for the housing and retail sectors - two key engines of the
economy - continue to improve, adding to confidence that Australia may
ride out the worst global downturn in generations.
Confidence in the real estate market prompted buyers to take out 2.2 per
cent more home loans in May, marking the eighth month in a row of
increases, according to the Australian Bureau of Statistics.
''The policy stimulus from the Federal Government and the central bank
has helped boost the housing market, offsetting the deterioration in
the labour market conditions that would otherwise subdue the
willingness of people to purchase houses,'' said economist Matt
Robinson of Moody's Economy.com.
Separately, the government's $20 billion cash handouts have helped
consumer confidence jump in July for a second straight month, sending
the monthly Westpac-Melbourne Institute survey to its highest in 19
months.
According to the survey, consumer
confidence soared 9.3 per cent in July to 109.4. The surge in June had
been a healthy 12.7 per cent.
The Reserve Bank yesterday left official interest rates unchanged at a
record low of 3 per cent, citing gathering evidence that the global
economy is stabilising. Australia remains one of the few developed economies to avoid sinking into a recession as measured by two quarters of contraction.
''Downside risks to the outlook have diminished, with conditions in
global financial markets improving this year and action to strengthen
balance sheets of key financial institutions under way,'' RBA governor
Glenn Stevens said.
There's even some confidence building in the corporate sector - one of
the weakest parts of the economy - that an upturn is within sight.
A survey of executives by the Australian Chamber of Commerce and
Industry found expectations for the September quarter rose to an index
of 54.5, the highest level in a year.
''We believe this is mainly on the back of continuing better economic
news, with respect to avoiding a technical recession ... also some
better international economic news with some resilience in the US
economy and continuing good news on China,'' ACCI's acting chief
executive Greg Evans told reporters in Canberra.
Home-front hope
The number of home loans, seasonally adjusted, increased 2.2 per cent
in May, according to the ABS, quickening from the 0.9 per cent increase
in April.
A survey of economists had expected only a 1.3 per cent gain in May.
First-home owners, as a share of owner-occupied borrowers, showed
continued appetite for property, increasing to 29.5 per cent in May,
from 28.6 per cent in April, revealing the continued demand spurt
triggered by the Federal Government's first-home owners grant.
Loans for owner-occupied housing rose 2.3 per cent in the month, while loans for investment homes gained 2.4 per cent.
Perking up
As fears about an economic meltdown ebb, consumers have also grown more optimistic about the future.
Consumer confidence "is 38.5 per cent above its level a year ago and at 109.4 optimists
decisively out-number pessimists for the first time since December
2007," Westpac chief economist Bill Evans said in a statement. Any
figure above the 100-mark indicates optimists outnumber pessimists.
The latest read-out on consumer sentiment follows surprisingly strong
retail sales for May and a string of retailers reporting
better-than-expected turnover at the cash register.
Westpac's Mr Evans noted the relief that Australia has for now dodged a
recession - according to first quarter GDP growth of 0.4 per cent -
along with the impact of the Federal Government's cash
splash, had lifted shoppers' spirits.
The "unexpected resilience" of the job market has also helped, Mr Evans
said. "Over the last two months the unemployment rate has remained
steady."
"It appears that firms which only a year ago were nominating a shortage
of quality labour as the major constraint on their businesses are now
hoarding labour," he said.
Australians will get a better idea of the strength of the labour market
tomorrow when fresh figures are released. The unemployment rate stands
at 5.7 per cent. Analysts expect it to rise to 5.9 per cent tomorrow
with the release of the June data.
"The lead indicators are suggesting that firms have sharply curtailed
plans to employ new workers but the ongoing switch from full-time to
part-time highlights firms' efforts to retain workers."
czappone@fairfax.com.au
BusinessDay
