Consumer confidence has risen towards a two year high driven largely by an increase in house prices and the resilience of the labour force.
The Westpac-Melbourne Institute Consumer Sentiment Index increased by 3.7 per cent in August.
According to Westpac senior economist Matthew Hassan, the index has risen 27.8 per cent since May, the biggest three month gain since the survey began in 1975.
Mr Hassan said the 4.2 per cent increase in house prices during the June quarter had helped drive the positive consumer mood.
The gain meant prices have now recovered most of the ground lost since the start of last year and have gone a long way towards dispelling any lingering concerns that local housing markets could be headed for the sort of double-digit declines seen abroad.
The other major positive was the surprisingly strong July labour market result which showed an unexpected rise in employment, as well as the unemployment rate stabilising at 5.8 per cent.
“These two pieces of news [have] helped alleviate two of the biggest sources of consumer anxiety over the last year: fear of losing money on their biggest single asset – the family home – and fear of losing their jobs,” Mr Hassan said.
Notably, the Index showed that comments by the Reserve Bank of Australia regarding the official cash rate had no impact on consumer sentiment.
Even in the ‘hyper-interest-rate sensitive’ mortgage belt, sentiment still posted a robust 6 per cent gain in August, according to the Index.