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Respondents were also more optimistic towards labor market conditions with the survey’s unemployment  expectations index falling 3.1%.
Respondents were also more optimistic towards labor market conditions with the survey’s unemployment  expectations index falling 3.1%.

Australians Remain Pessimistic About Economic Outlook

Australians are concerned about their own finance prospects, for a marked lift in spending patterns will remain remote

Australians Remain Pessimistic About Economic Outlook

Pessimists outnumbered optimists in Australia for an eighth consecutive month in July, according to the latest Westpac-MI consumer sentiment report released Wednesday.
And according to Bill Evans, chief economist at Westpac, that doesn’t bode well on the outlook for household spending, the engine room of the Australian economy, Business Insider reported.
The headline confidence index rose fractionally during the month, increasing 0.4% to 96.6. While a small improvement, it still indicates that there are more pessimists that optimists in Australia right now, continuing the trend seen since late last year. From a year earlier the index fell 2.5%.
Over the month, improved readings towards current family finances, economic conditions over the next year and whether now was a good time to buy a major household item were largely offset by a sharp deterioration in sentiment towards the outlook for finances, which tumbled 4.2%. Respondents were also more downbeat on the longer-term outlook for the economy.
Evans said that out-of-cycle mortgage rate increases following regulatory changes introduced by Australia’s banking regulator, APRA, along with heightened speculation that the RBA may be considering hiking official interest rates, likely drove the decline in sentiment towards finances in the year ahead.
Kate Hickie, Australia and New Zealand economist at Capital Economics, said that recent increases in energy costs may have also been a factor. “It is possible that this was partly driven by the energy price hikes that occurred at the start of July, which will feed through to higher household utility bills in the coming months,” she said.

People Concerned
The weakness in the survey’s finance measures over the past year do not paint an optimistic picture on the outlook for spending levels, says Evans. “While-ever respondents remain concerned about their own finances prospects for a marked lift in spending patterns will remain remote,” he said.
At 8%, the drop in the longer-term economic outlook was the largest of any category over the past year. This too could explain the concern being expressed about household finances at present.
While concerns about the economy and finances remained entrenched, confidence towards Australia’s housing and labor markets also improved. “Conditions in the housing market appear to be stabilizing, at least for the time being,” said Evans.
The survey’s ‘time to buy a dwelling’ index rose by 3.1% from May, the largest increase seen for this year. A lower reading indicates that less people see unemployment levels rising.
Evans said much of the improvement was driven by younger respondents following increased state government assistance to first-home buyers. “Recent increases in state government assistance for first home buyers appears to have been a big factor in the July rise with the sub-index for 25–34 year olds surging 36% in the month.”
Mirroring the bounce in whether now was a good time buy, expectations for house prices also surged, rising 8.6% after falling 11.8% over the prior two months.
Following a string of robust data in recent months, respondents were also more optimistic towards labor market conditions with the survey’s unemployment expectations index falling 3.1%. A lower reading indicates that less people see unemployment levels rising.

Living Standards Falling
A report by Commonwealth Bank senior economist Gareth Aird has found that Australia's high immigration intake is papering over economic weakness in headline figures, but when you break down those numbers per person a bleaker picture is revealed, ABC.net reported.
"Per capita measures of the economy suggest that growth in living standards has stagnated and for some sections of the resident population, in particular younger people, it has gone backwards," he wrote.
This weakness is reflected in many aspects of living standards: from stubbornly high underemployment and weak wages growth to surging home prices and debt, as well as an increase in urban congestion.
Aird pointed out that Australia has one of the highest population growth rates among developed economies, more than half of which is due to net immigration. However, while this makes Australia's headline economic growth rate look reasonable, on a per capita basis, GDP growth has been trending downward since the recovery from Australia's last recession in the early 1990s.
This in turn has seen the Bureau of Statistics' key measure of household living standards—real net national income per capita—essentially flatline since the global financial crisis.

 

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