By James Glynn
Last week, Australian consumer confidence saw a significant increase, boosted by growing optimism surrounding cooling inflation and the possibility of mortgage interest rates decreasing by midyear.
According to a survey conducted by the ANZ Bank and pollster Roy Morgan, consumer confidence rose by 3 points over the week. The four-week moving average for confidence also saw a positive change with a rise of 2.1 points.
Adelaide Timbrell, ANZ Senior Economist, noted that consumer confidence started the year at its highest level since late January 2023. She also mentioned that this January experienced the third-largest jump in confidence over the past 15 years.
The rise in consumer confidence aligns with money market expectations of an interest rate cut by the Reserve Bank of Australia as early as May.
Timbrell explained, "There have been notable increases in the four-week average confidence among outright homeowners and indebted homeowners, likely due to rising housing prices and more stable mortgage rates. We anticipate consumer confidence to improve significantly as inflation continues to show signs of decline."
However, there remains a significant risk to confidence if fourth quarter inflation data, to be released at the end of this month, indicates that the Reserve Bank of Australia will further increase the official cash rate in February.
According to the survey, weekly inflation expectations decreased by 0.1 percentage points to 5.2%, while the four-week moving average remained unchanged at 5.3%.
The survey also revealed a decline of 1.6 points in confidence regarding current financial conditions over the week, while future financial conditions saw a rise of 0.7 points.
Current economic conditions experienced an increase of 2.1 points, marking its highest level since late May 2022, while future economic conditions climbed 4.9 points to its peak since late January 2023.
Additionally, consumers displayed more optimism about purchasing major household items, as the index surged by 8.7 points over the week to its highest level since mid-January 2023.
The ANZ-Roy Morgan Australian consumer confidence rating is based on 1,511 online and telephone interviews conducted during the week ending on Sunday.
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