Australia’s economy is set to bounce back in record time from the coronavirus recession as upbeat consumers rush to buy furniture, electrical appliances and even houses.
Business shutdowns and the closure of Australia’s border to non-citizens in March caused a record economic downturn and unemployment to hit 1990s levels.
Workers have also been forced to rely on JobKeeper wage subsidies as borrowers have deferred their home loan repayments for six months.
Despite that, Australians are bizarrely happier now than before COVID-19, with the Westpac-Melbourne Institute consumer confidence measure surging in November to a seven-year high, as more people splurged on furniture, electrical appliances and restaurant meals, and even considered buying a house.
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Australians are bizarrely happier now than before COVID-19, with the Westpac-Melbourne Institute consumer confidence measure surging in November to a seven-year high. Pictured are shoppers in Melbourne’s Bourke Street Mall in the city following three months of lockdowns
A reading above 100 means more people are optimistic but this month’s survey of 1,200 Australians produced a score of 107.7 points, marking a 42.5 per cent surge from April’s 75.6 points, which itself was the worst reading since the 1991 recession.
How the worst may be over
Westpac-Melbourne Institute consumer sentiment in November was the best in seven years
More people are keen to buy a house than a year ago
Australians also more likely to buy furniture and electrical appliances than November 2019
Credit card spending also up on restaurants and petrol following end of Melbourne lockdowns
Remarkably, the optimism preceded drug maker Pfizer indicating a coronavirus vaccine could be ready for distribution by the end of 2020, but the results followed the end of Melbourne’s three-month lockdown.
Australia’s economy sunk into recession in the March and June quarters, marking the first technical recession in 29 years.
The September quarter number from the Australian Bureau of Statistics isn’t due out until December 2.
Despite that, Prime Minister Scott Morrison declared the recession was most likely over.
‘The comeback is underway, there’s no doubt about that,’ he told Parliament on Wednesday.
‘Confidence is rebuilding in our economy; figures released today show that it is at a seven-year high—a seven-year high!
‘That shows that Australians are getting their confidence back as we emerge from the COVID-19 recession.’
Treasurer Josh Frydenberg continued the theme on Thursday, highlighting how 446,000 jobs had been created during the past four months.
‘The government has the Australian people’s back, we’ve shown that since the start of this crisis, through this crisis and we’ll be with them right until the end of this crisis,’ he told Sky News.
Prime Minister Scott Morrison seized on the Westpac-Melbourne declared the recession was most likely over.
The Senate last night passed the JobMaker Hiring Credit Scheme giving employers taxpayer-funded subsidies of $200 a week if they take on a welfare recipient aged 16 to 29 and $100 a week if they are aged 30 to 35.
Australia’s unemployment rate stood at 6.9 per cent in September, a level below July’s 22-year high of 7.5 per cent but well above February’s pre-pandemic reading of 5.1 per cent.
Buying a house
The higher jobless rate was no deterrent to buying a house, with the Westpac-Melbourne Institute survey reading about whether now was the right time to buy property surging by eight per cent in November.
With interest rates this month cut to a new record-low of 0.1 per cent, the Westpac-Melbourne dwelling purchase measure stood at 132 index points, a level well above the pre-pandemic reading of 119 points in November 2019 when the Sydney and Melbourne markets were recovering from a two-year downturn. Pictured is a Sydney unit block in March 2020
With interest rates this month cut to a new record-low of 0.1 per cent, the dwelling purchase measure stood at 132 index points, a level well above the pre-pandemic reading of 119 points in November 2019 when the Sydney and Melbourne markets were recovering from a two-year downturn.
Sydney’s median house price rose by 0.5 per cent in October, following five consecutive months of decline, CoreLogic data showed.
Melbourne was last month the only capital city not the record an increase in median house prices.
The Commonwealth Bank, Australia’s biggest home lender, also revealed this week the number of borrowers deferring their mortgage had fallen to 46,000 as of October 31, down 63 per cent from 125,000 in June.
The Westpac-Melbourne Institute survey also showed a 6.7 per cent increase in November about whether now was the right time to buy a major household item. Pictured is a JB HI-FI at Macquarie Centre in Sydney’s north
Australia’s big banks from March until September offered struggling borrowers the option of a six-month mortgage repayment holiday.
This has been extended until March next year, the same month fortnightly JobKeeper wage subsidies end.
Buying furniture or an electrical appliance
The Westpac-Melbourne Institute survey also showed a 6.7 per cent increase in November about whether now was the right time to buy a major household item, which covers furniture and electrical appliances.
The index reading of 121.3 points was higher than the 117.9 point score of a year ago.
Westpac credit card data also showed big increases in spending on hospitality, including restaurants, and petrol as more people left their house, especially in Melbourne.
A reading above 100 means more people are optimistic but this month’s survey of 1,200 Australians produced a score of 107.7 points, marking a 42.5 per cent surge from April’s 75.6 points, which itself was the worst reading since the 1991 recession
The Commonwealth Bank has also revealed credit and debit card spending by its customers in the first week of November was 13 per cent higher than a year earlier.
This marked the biggest annual increase since the start of the pandemic in March.
Belinda Allen, a senior economist with the Commonwealth Bank, said the end of Melbourne’s Stage Four lockdown had boosted spending.
‘The easing of restrictions in Victoria, and more open and the prospect of more open internal borders, saw card spending surge,’ she said.
‘There was a lift in both online and in-store spending showing the breadth of the rise.’