Election Boosts Consumer Confidence

By Glenn Dyer | More Articles by Glenn Dyer

In the space of two days, two quite different views of the election of the Rudd Labor Government.

Yesterday the election was given as part of the cause for a sharp improvement in consumer confidence, along with the decision to leave interest rates steady last week by the Reserve Bank.

The Westpac/Melbourne Institute survey of consumer sentiment showed that those two factors contributed to the first rise consumer confidence in three months.

The sentiment index climbed 1.8% this month from November to a seasonally adjusted 112.5, according to the survey released yesterday (like all surveys of this kind a reading higher than 100 shows optimists outnumber pessimists.)

And yet Tuesday in the monthly National Australia Bank survey of business confidence, a different take from corporates of all sizes on the Rudd Government's election. The survey showed business confidence falling to the lowest level in almost a year.

"A change of government was also responsible for a sentiment of business uncertainty, according to a special question in the survey.

"The survey asked if a change of government was likely to add or detract from their business expectations and 22% saw potential negative impacts, compared to only 5% who expected the incoming Rudd government to be positive for their business.

"The most concerned sectors were mining, agriculture, transport and construction," the NAB commented.

And yet the view from consumers, who are also voters, was very different and perhaps reflects the very high expectations of the first federal Labor Government for 11 years.

The firming in the consumer sentiment index to 112.5, recouped some of November's 4.2% drop and left it a solid 5.9% higher than December last year.

Westpac Chief Economist, Bill Evans said the survey was "a solid result'' and came at a "time when petrol prices have increased by 8.3% over the month.

But he said the '' major event over the month was the change of government.''

"Not surprisingly there were large moves in the confidence of both Labor and coalition voters,'' Evans said.

The survey showed the confidence of victorious Labor Party voters surged by 15.6%, while the confidence of supporters of the ousted Liberal National Coalition fell by 16.2%.

An index measuring the state of family finances compared with a year earlier rose 4.5% in December and Westpac's index measuring whether now is a good time to buy a major household item, such as a television or appliance, was up 3.3%.

Evans said households would have been buoyed by the Reserve Bank's decision to hold rates steady.

Westpac's index measuring consumers' outlook for the economy for the next 12 months surged 9.7%, while an index measuring the outlook for family finances for the next 12 months fell 6.4% from November.

The survey was conducted last week between December 5 and 9.

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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