The latest Westpac-Melbourne Institute Index of Consumer Sentiment showed continual improvement in consumers’ house price expectations, as well as home buying sentiment “near a five-year high”.
The national survey, conducted on 1,200 consumers between 2 September and 6 September 2019, showed a 3.9 per cent increase from August in consumers’ house price expectations, which contributes to an overall 45.8 per cent increase in the four months since May this year.
All major cities reportedly recorded a bounce in price expectations, with a notable increase of 6.7 per cent across NSW.
The data also showed a 2.9 per cent reduction in consumer home-buying sentiment since August. However, the current figure remains 19.1 per cent above the results recorded a year previous, in September 2018, and sits near a five-year high, according to the report.
Sydney and Melbourne both recorded steeper declines in buyer sentiment than other places around Australia, suggesting that the recently improved market conditions in these cities is affecting buyer enthusiasm.
On the whole, the report recorded an overall decline of 1.7 per cent in consumer sentiment, with lower outlooks reported for both current and future family finance standings, as well as short-term economic conditions, and the desire to purchase major household items.
While sentiment for short-term economic conditions remains low, resulting in a 3.1 per cent decrease in the “economy in the next 12 months” sub-index, consumers anticipate long-term economic growth.
The results showed a 2.1 per cent increase in consumer sentiment on the economy over the next five years, with a result of 97.8, well above the long run average of 91.3.
In light of the federal government’s tax cuts to low and middle-income earners, the September survey included additional reporting on said tax returns.
Westpac estimates that 30 per cent of households are expected to receive a “meaningful rebate”, and the results showed that just over 16 per cent of respondents had received a payment already.
Of those who received a payment, 25 per cent intended to save the full amount, whereas 29 per cent planned to spend it all. A further 16 percent had the intention to spend over half the rebate, and the remainder (53 per cent) expected to spend less than half.
The report concluded with commentary from Westpac chief economist Bill Evans on the expected results of the next Reserve Bank Board meeting on October 1.
Mr Evans and Westpac anticipate the meeting in October will result in the official cash rate being dropped a further 25 basis points to 0.75 per cent.
“In August the Reserve Bank released a revised set of forecasts which showed a downgraded outlook for the unemployment rate; a further extension to the time when the inflation rate is expected to move into the 2-3 per cent band; and a downward revision to the outlook for wages growth,” Mr Evans stated in the report.
“All of these forecasts were based on ‘market pricing’ for the interest rate path at the time which included one more rate cut in 2019 and a second move in early 2020,” he said.
“Month to month timing of RBA moves is imprecise, but with the case for lower rates quite clear, and both US Federal Reserve and European Central Bank likely to be easing policy in the next week or so, the next meeting in October seems a sensible time for the Reserve Bank to deliver the next rate cut.
“Westpac expects a second cut in February 2020, which we believe will follow further cuts from the Federal Reserve by year’s end.”
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