Westpac has reported a surge in consumer sentiment, which the bank describes as a “very strong result”.
The survey showed consumer sentiment rose by 6.4 per cent, from 96.2 in April to 102.4 in May – the highest level of the index since January last year.
The boost was evident in all states except Western Australia, where confidence fell by 7.7 per cent.
Westpac chief economist Bill Evans said the two driving forces behind the rise in consumer sentiment were the recent federal Budget and the latest interest rate cut by the Reserve Bank.
“In recent times the index has typically fallen in May (down in six of the last 10 years) with the Budget usually the key explanation,” he said.
“The surge in the index this year represents the first time we have had a strong result in May since 2007.
“Whilst undoubtedly positive, the impact of the rate cut is likely to have dominated by the response to the Budget.”
Mr Evans noted the confidence of those respondents who hold a mortgage increased by 4.8 per cent although that rise was less than the overall lift for all respondents of 6.4 per cent.
The report also found that consumer confidence in housing has somewhat recovered, with the index showing a 5.0 per cent increase on “whether now is a good time to purchase a dwelling”.
Mr Evans said this latest round of results provide some encouragement for Westpac that households might continue to lift the pace of expenditure growth.
“Our view, for now, is that the most likely scenario is for an extended period of steady rates whilst recognising that conditions in the labour market remain fragile and this latest boost to confidence needs to be sustained,” Mr Evans said.