Thursday, September 10, 2009

Our economic future has never looked better

The latest Westpac-Melbourne Institute survey shows we feel more optimistic about our economic outlook than at any time since the Institute started asking us in the early 1970s.

Asked last week how they felt about economic conditions over the next five years a record 49 per cent of Australians were positive. Only 18 per cent were negative. The gap - 31 percentage points - is the widest on record.

Importantly the optimism is widespread. Coalition voters were predominantly negative up until August. This month Coalition optimists outweighed Coalition pessimists by 15 points. Even mortgage holders facing an increase in rates have become increasingly positive with optimists outweighing pessimists by 21 points.

An unpublished breakdown of the answers made available to the Herald suggests an almost carefree compulsion to buy...

Around 54 per cent of those surveyed agreed that "now is a good time to buy a major household item" with only 24 per cent saying it was a bad time; the widest gap since the height of the mining boom in mid-2007.

Asked about economic conditions in the year ahead 43 per cent were positive, more than double the 18 per cent who were negative; also the widest gap since 2007.

The results are useful to the Government because they suggest its stimulus measures have been working, but also useful to the Opposition because they suggest its safe to wind them back.

More importantly they suggest that negative messages won't wash with voters in the coming election . Acceptance that the economy is improving is overwhelming in every income group, every occupational group, in both the city and the country and among both women as well as men.

The overall Westpac Index has surged a record 34 per cent in the four months and 5 per cent in September to 119.3 on a scale in which 100 indicates a balance between optimists and pessimists.

Westpac chief economist Bill Evans described the result as "stunning" and "truly extraordinary".

"Good news appears to be drowning out warnings on rate rises," he said.

"We asked about the news people could remember hearing and 'economic conditions' dominated 'interest rates' 69 per cent 33 per cent."

"Given the extensive media coverage of likely rate hikes this is surprising."

Actual retail spending eased off in July with figures released yesterday reporting a dip of 1 per cent, still up 5.2 per cent on the year up 5.8 per cent since before last December's stimulus payments.

But the detail of the figures points to optimism. Spending in supermarkets fell 1 per cent while spending on takeaway food climbed 2.5 per cent. Spending on household goods slipped 3.5 per cent while spending on pharmaceuticals and cosmetics grew 1.4 per cent.

Borrowing for housing slipped 2 per cent. The Melbourne Institute Index survey has consumers continuing to feel better about buying houses than at any time since 2001 with optimists outweighing pessimists 45 points. Asked whether now is the right time to buy a car, optimists outweighed pessimists 39 points.

How do you feel?

Economy next 5 years:

Good: 49%
Bad: 18%

(Best result since records began)

Economy next year:

Good: 43%
Bad: 18%

(Best since December 2007)

Buying a major household item:

Good time:
Bad time: 24%

(Best since August 2007)

Melbourne Institute

Published in today's SMH and Age