Sentiment among Australian consumers climbed to its highest level in nearly three years in September, the results of a survey by Westpac and the Melbourne Institute revealed Wednesday. The survey was carried out ahead of a widely expected victory for the the Liberal-National coalition in last week's federal elections.
The consumer sentiment index increased 4.7 percent to 110.6 in September from 105.7 in August. The index is now at its highest level since December 2010.
Westpac's Chief Economist Bill Evans said that the important new factor that influenced sentiment this month is the recent Australian election.
The survey was conducted over the period from September 2 to 8, covering the election day of September 7. It was really only the last day of the survey that covered the actual election result although media coverage pointed strongly to a Coalition victory throughout the survey period, Evans noted.
"I think it is reasonable to conclude that the election result played an important if not leading role in this strong boost to Consumer Sentiment," he said.
If sustained, this improvement indicates that the Reserve Bank's series of rate cuts which began in November 2011 are finally gaining strong traction with households, Evans observed.
The components of the index indicated that the improvement in confidence is dominated by rising optimism about prospects for the economy rather than how households feel about their own finances.
Confidence in the housing market also remained high. However, households' assessments of job security was very weak in September, the report said.
A survey by the National Australia Bank showed Tuesday that confidence among Australian businesses strengthened considerably in August, reaching its highest level in more than two years. These results were also moved by an expected victory of the coalition, according to the NAB.
The economy expanded 0.6 percent quarter-on-quarter in the second quarter, according to figures released by the Australian Bureau of Statistics last week.
The Reserve Bank of Australia kept its benchmark cash rate unchanged at record-low of 2.5 percent in September.
The central bank has reduced the cash rate by a cumulative 225 basis points since November 2011 on the premise that accommodative policy is needed to support demand in areas outside the resources sector, as the peak in mining investment approaches.
