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MUCH NEEDED LIFT IN CONSUMER AND BUSINESS CONFIDENCE

Tuesday, 16 September 2014

BankSA State Monitor shows rise off a low base

South Australian consumer confidence levels have lifted following their decline to a 17-year low in June, the latest BankSA State Monitor survey has found.

Released today, the September State Monitor shows that consumer confidence is up 5.9 points, from 98.4 to 104.3 points, since the last survey was conducted.

The recent modest rise follows a sharp fall in consumer confidence to a record low between February and June 2014.

It also brings consumer confidence back into line with the average consumer confidence levels recorded over the past two years, but it is still well below the pre-GFC period of 2007/08 and the post-GFC rebound period of late 2009/10.

The September 2014 BankSA State Monitor is the 55th monitor in a series that has tracked consumer and business confidence in South Australia for more than 15 years.

In line with the lift in consumer confidence, business confidence rose by 5.4 points, from 100.4 index points in June 2014, to 105.8 index points in September 2014, bringing this measure back to its highest level in 12 months.

BankSA Chief Executive Nick Reade said business confidence still remains below the pre-GFC and post-GFC levels, but described the most recent rise as encouraging and one that will hopefully be the start of a sustained rebound.

In the consumer survey, 29% of people say they are confident their own financial situation will improve and 30% say they have made a significant purchase in the past three months.

Other factors showing positive gains include: a significant lift in confidence about the climate for consumer spending over the next 12 months (22% net improvement); more confidence about job security and employment prospects (13% net improvement) and more confidence about job mobility (9% net improvement).

Mr Reade said following a sharp fall in consumer confidence to a record low level in June 2014, it was encouraging to see its modest rebound in September 2014.

“The rebound is likely to have been influenced by a number of factors, including record low mortgage rates, continuing low and stable official interest rates, the dissipation of much of the initial negative publicity about the Federal Budget, and the strong Australian dollar making imports and international travel affordable,” said Mr Reade.

“With tax returns also coming in and helping with household cash flow, plus the recent abolition of the carbon tax feeding into lower electricity prices and lower cost of consumer goods, it’s appropriate to see a commensurate rise in consumer confidence.

“However, it should be borne in mind that the consumer confidence level remains low by historical standards, and consumer confidence is still variable, with metropolitan, white collar, young and male consumers having higher confidence than middle age to older, rural, female and blue collar consumers,’’ he said.

When it comes to business confidence, which at 105.8 index points is at its highest level in 12 months, Mr Reade said this was still below the pre-GFC and post-GFC levels, but nevertheless encouraging.

Most of the shifts in business confidence across the other variables are small, but there are some significant increases, including: SME owners’ perceptions of their own overall business situation (24% net increase in confidence since June 2014); SME owners’ confidence that their own business performance will pick up within the next 12 months (9% net increase in confidence); and their perception that business activity in the State is generally picking up (9% net increase in confidence).

In the business survey, there is 9% increase in perception that business activity is picking up, and substantially more positive sentiment among SME owners about their own business situation.

Mr Reade said this suggests that business sentiment about business activity is more buoyant than consumer sentiment about business activity. This is likely to mean that there will be a business-led recovery, ahead of a pick-up in consumer sentiment.

He said the low interest rate climate has helped, but risk-taking is low.

“Consumers want businesses to invest more, while businesses are waiting for consumers to spend more, and it’s likely that businesses will break out first, because they are quite confident about their own prospects,” Mr Reade said.

“Once business knows that the global economic environment is more stable and picking up in a sustained fashion, they will begin to invest more to develop and grow their businesses, including training and hiring staff.

“And once consumers know that their jobs are secure, with additional employment available to boost incomes if needed, and their own debt position is sound, they will increase their spending.’’

BankSA State Monitor is an ongoing independent survey conducted three times a year on South Australian consumer and business confidence. The survey commenced in November 1997 and surveys 300 consumers and 300 business owners across the State.