Consumer confidence has rebounded and is pointing to a pickup in spending, Westpac says.
The latest quarterly Westpac McDermott Miller survey index rose to 119 from 115 three months ago. Any reading over 100 indicates more optimists than pessimists. The index is above its long-term average of 112.
"Consumer spending
has been a notable weak spot in the economic recovery since the beginning of the year," Westpac economist Donna Purdue said.
"However, at these levels confidence is indicative of a pickup in spending growth through the June quarter."
Supporting the rise in confidence were a sharp fall in unemployment and high levels of business confidence, she said. Also, Fonterra had foreshadowed a near-record payout while the Budget had included $15 billion of tax cuts over the next four years.
On the other side of the scales, higher fuel prices and inflation in general, along with rising interest rates and falling house prices, were likely to temper the increase in spending.
At face value the latest survey represented a clear risk to the Reserve Bank's view that a reasonably long-lasting shift in household behaviour away from spending and towards saving was under way, she said.
The latest survey repeated a question about the expected impact of the changes to the tax system and benefits, the difference being that this time the changes had been announced.
"Overall, consumers appear to have been pleasantly surprised by the changes: 37 per cent of respondents now expect a positive effect (up from 33 per cent in March), while 28 per cent expect a negative effect (from 34 per cent)," Purdue said.
The forthcoming rise in the GST rate appears to have influenced responses to one of the questions: is it a good or bad time to buy a major household item. A net 31 per cent think it is a good time to buy, the highest reading for this indicator for five years.
A net 14 per cent said they were worse off than a year ago, compared with a net 22 per cent in March.
"This is the least pessimism respondents have shown toward their current financial position in two and a half years," Purdue said.
