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CHART OF THE WEEK: AUSTRALIA’S CONFIDENCE MAKES A COMEBACK

16 April 2018

Bob Cunneen, Senior Economist and Portfolio Specialist, NAB Asset Management

Sources: NAB and Westpac Melbourne Institute (WMI).

 

Confidence of consumers and businesses are key indicators of economic growth. Consumption, investment and housing activity depend upon confidence. However, confidence surveys can be both leading and misleading indicators. Occasionally confidence may be a reaction to events that are only transitory tremors rather than fundamental signals.

Fortunately there are now encouraging signs for Australia. 

NAB’s survey shows business confidence has been steadily improving over recent years (blue line). Low interest rates and rising profits appear to have lifted business confidence - a positive sign for future business investment.  

Even the WMI consumer sentiment survey is improving after a tough couple of years from 2014 to 2017 (red line). Consumers seem to be more optimistic given stronger jobs growth. However consumer sentiment is still constrained by rising energy prices and high household debt. So consumer sentiment is yet to match business’ high confidence levels.

 

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