Consumer confidence across Australia increase by 2.2 percent after previously dropping to its lowest level since October 2020. While respondents’ confidence in ‘current financial conditions’ jumped by 6.3 percent.
According to a recently published survey undertaken by ANZ and Roy Morgan, this uptick pushed consumer confidence slightly above neutral at 100.1 for the week of the 17th to the 23rd January, which is still below the four-week average of 103.1.
The confidence level is still significantly below the monthly average of 112.4 since 1990. However, on a positive note the number of respondents willing to by a major household item increased by 6.3 percent after a 15.8 percent drop in the first fortnight of 2022.
“The recovery came in the same week that the unemployment rate was reported as dropping to its lowest in more than 13 years,” says David Plank, the ANZ head of Australian economics.
The more optimistic sentiment however was not consistent across the board nationwide.
“Covid cases appear to have peaked, though deaths unfortunately made new highs. Confidence was driven by rises of 7.7 percent in Victoria, 8.8 per cent in WA and 3.7 percent in Queensland,” says Mr. Plank.
“But it dropped in NSW by 2.4 percent and South Australia down by 2.6 percent. The live entertainment of the Australian Open tennis and great weather might have added to Victoria’s positive outlook. Ahead of the Q4 2021 CPI (consumer price index) data, inflation expectations recorded a 0.1ppt rise to match the recent high of 5 per cent reached in December,” continued David Plank.
The Australian Bureau of Statistics (ABS) reported on the 25th January that the CPI rose 1.3 percent in the December 2021 quarter and 3.5 percent annually, with the most significant price rises coming from new dwellings up by 4.2 percent and automotive fuel up by 6.6 percent.
“Shortages of building supplies and labour, combined with continued strong demand for new dwellings, contributed to price increases for newly built houses, townhouses and apartments,” says the bureau’s head of prices statistics Michelle Marquardt.
“Fuel prices rose again in the December quarter, resulting in a record level for the CPI’s automotive fuel series for the second consecutive quarter,” continues Michelle Marquardt.
Domestic holiday travel and accommodation up by 4.8 percent also contributed to the December quarter CPI increase, reflecting increased demand due to the easing of domestic border restrictions in late October and the lead up to the Christmas holiday period.
Prices of goods rose 4.3 percent through the year, while those of services rose 2.3 percent.
“Annual price inflation of goods surpassed that of services in the December quarter and was the highest since 2008. Fuel prices were the largest contributor to higher goods inflation. More broadly, global supply chain disruptions and material shortages, combined with rising freight costs and high demand, contributed to price increases across a wide range of goods including dwelling construction materials, motor vehicles, furniture and audio-visual equipment. Annual trimmed mean inflation is the highest since 2014, reflecting the broad-based nature of price increases, particularly for goods,” says Michelle Marquardt.
Australia’s Unemployment Rate Drops to The Lowest Level Since 2008
The unemployment rate in Australia has surprisingly dropped to 4.2 percent in December 2021 from the figures of 4.6 percent recorded in the previous month. The drop means that Australia is currently experiencing it’s lowest recorded levels of unemployment since 2008.
The Australian Bureau of Statistics (ABS) revealed that 64,800 people joined the workforce in December 2021 in a further recovery from last year’s Covid-19 lockdowns in NSW, Victoria and the ACT.
“Recovery in NSW and Victoria continued to have a large influence on the national figures, with employment in these two states increasing by 32,000 and 25,000 people between November and December,” says ABS head of labour statistics Bjorn Jarvis.
These figures take employment back to where it was in May 2021 for these two states.
Bjorn Jarvis said the latest report provides an indication of the state of the labour market in the first two weeks of December, before the large increase in virus cases later in the month.
BIS Oxford Economics chief economist Sarah Hunter believes that based on the economic experiences of overseas nations it is suggested that the impact of the Omicron variant will be significant but short-lived, and less economically damaging than previous waves.
“Overall, the unemployment rate is set to remain below 4.5 per cent this year, and with businesses still looking to add staff this will create further upward pressure on wages and domestic inflationary pressure. Today’s data reinforces our view that the RBA will tighten the cash rate much earlier than they are currently signalling,” says Sarah Hunter.
4.2 percent is the lowest since August 2008 which was recorded just prior to the start of the global financial crisis when records were 4.0 percent.
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