Consumer confidence 'perks up'

Satish Ranchhod.
Satish Ranchhod.
Households in New Zealand and Australia are showing increased optimism, reversing recent declines, according to separate surveys released yesterday.

While spending intentions are up, warning bells about rising household debt are also sounding.

In New Zealand, the Westpac McDermott Miller consumer confidence index rose 3.8 points in March to hit 111.2, reversing most of the drop seen after last year's election, taking consumer confidence to around average levels. Points over 100 indicate optimists outweigh pessimists.

Westpac senior economist Satish Ranchhod said as election-related uncertainty eased, consumer confidence had ''perked up again''.

''With households feeling a bit more upbeat about the economic backdrop, there has also been a lift in spending appetites,'' he said in a statement.

Households had been increasing their spending on leisure activities and more thought now was a good time to make major purchases.

''However, as their spending appetites have increased, households have become less focused on paying down debt,'' he said.

Given a drop in mortgage rates, a resurgence in the housing market and still strong population growth, ''we expect that cash registers will continue ringing over the coming months,'' Mr Ranchhod told BusinessDesk.

However, Mr Ranchhod warned that as spending appetites had increased, so too was households' willingness to take on debt.

Each quarter the survey asks households what they would do if they received a windfall of $10,000 and the number who said they would use this to pay down debt has now fallen to the lowest level since the survey began in 1998, he said.

According to Mr Ranchhod, relative to disposable incomes, debt levels are now at record highs, with much of this leveraged against housing assets.

A net 11.7% of the 1552 people surveyed expect the economy to improve over the coming year, up from 4.9% on the previous quarter.

A net 17.9% see better times for the economy over a five-year period, versus 14.3% in September.

The number of households who think now is a good time to purchase a major household item rose 9.1 points to 22.5%, against 13.4% in the prior quarter

In Australia, consumer confidence largely recovered from the previous week's sharp drop but remained vulnerable to any further volatility in financial markets, AAP reported.

The ANZ-Roy Morgan Consumer Confidence Index rose 2.2% to 118.5 points in the week to March 18, claiming back almost all the ground lost in a 2.5% decline over the previous seven days.

Households were apparently more optimistic about the future following last week's NAB business survey that showed businesses enjoying their best conditions in 21 years.

There were broad-based gains, with households particularly positive about near-term financial conditions.

ANZ head of Australian economics Felicity Emmett on Tuesday said overall confidence has stabilised after trending lower in February, but much would hinge on this week's jobs report and unemployment data.

''Another solid report with a tick down in the unemployment rate, in line with our expectations, is likely to support confidence over the coming weeks,'' Ms Emmett said.

-Additional reporting by AAP/BusinessDesk

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