Australians recovering from virus trauma

Colin Brinsden
(Australian Associated Press)

 

It’s not just the boffins at Treasury who are more confident about the economic outlook.

Consumers too are happier about their lot than they were just a couple of months ago.

The monthly Westpac-Melbourne Institute consumer sentiment index jumped 6.3 per cent in June and has now recovered the full 20 per cent loss seen when the coronavirus pandemic exploded in March.

Westpac chief economic Bill Evans thinks the rebound is remarkable.

“Confidence has clearly been buoyed by Australia’s continued success in bringing the coronavirus under control,” Mr Evans said on Wednesday.

However, with the unemployment rate to remain elevated, extensive restrictions staying in place and the economy facing permanent structural change, it would be surprising if the momentum continues.

This was confirmed in the weekly ANZ-Morgan consumer confidence index, which dropped 1.3 per cent, ending a nine-week recovery.

“Last week’s fall in confidence can be seen as more of a consolidating move than weakness, as it has come after the most extended stretch of gains in the history of the weekly survey,” ANZ economist David Plank said.

The weekly gauge showed overall views on economic and financial conditions had barely changed.

“A pleasing result given the news that Australia is almost certainly in a technical recession,” Mr Plank said.

Treasury secretary Steven Kennedy has indicated the economic hit from the coronavirus will be smaller than initially expected because the health outlook has improved.

However, he said it will still be the single biggest economic shock Australia has faced in living memory.

Economists at National Australia Bank expect the economy will shrink by a hefty 8.5 per cent in the June quarter after the relatively modest 0.3 per cent contraction in the previous three months.

Treasurer Josh Frydenberg reiterated Australia’s economic performance compares “very favourably” with the rest of the world.

“In this country, we have performed remarkably well on both the health and the economic front.,” he told parliament.

“We have flattened the curve, we have started to ease the restrictions and we are getting people back to work.”

Other new economic figures show initial concerns over the pandemic saw fewer home loans being taken out and a slump in fixed-term personal loans, such as for cars, which fell by almost 25 per cent in April.

“This was the largest fall in the history of the series, which started in July 2002, and was driven by a 37.8 per cent fall in the value of loan commitments for road vehicles,” ABS chief economist Bruce Hockman said.

Meanwhile, the Morrison government is moving to ease the burden of paying tax instalments for millions of Australians by suspending indexation for the 2020/21 financial year.

The change will affect instalments payable to the Australian Taxation Office for an estimated 2.2 million people paying Pay As You Go income tax instalments and around 81,000 paying GST instalments.

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