Falling unemployment rate lifts confidence

A further drop in unemployment rate has given a boost to confidence as Australians viewed their financial situation in a more positive light.

The weekly ANZ-Roy Morgan consumer confidence index – a pointer to future household spending – jumped 1.5 per cent to above its long-run average.

Figures released last week showed the unemployment rate fell to 5.5 per cent in April, the sixth consecutive monthly decline.

It further eroded fears that the end of the JobKeeper wage subsidy in March would be a major hiccup for the economy.

The confidence survey found respondents’ views on their current financial condition were particularly upbeat, rising 4.5 per cent and with only 23 per cent voting they were “worse off” than this time last year, the lowest result since February 2020.

Views on future financial conditions were also up 3.3 per cent.

ANZ head of Australian economics David Plank warned that future confidence may be challenged by the emergence of new COVID-19 cases in Melbourne.

“However, we know the impact on sentiment is temporary if the outbreak is quickly brought under control,” he said.

Another potential negative for confidence and spending is the rising cost of transport on the household budget.

The Australian Automobile Association (AAA) has found the average household spent $354 per week on transport in the first three months of this year, a $44 increase on the previous quarter.

This 14.3 per cent increase was the largest in at least five years.

“This sharp rise in transport costs needs to be monitored by governments, which need to avoid policies and decisions that impact cost of living,” AAA managing director Michael Bradley said.

The Australian Bureau of Statistics will release its weekly payroll jobs report on Tuesday, which will again be pored over by economists to see if there has been any impact from the demise of JobKeeper, despite the latest positive news on unemployment.

“We aren’t quite out of the woods yet,” St George economist Matthew Bunny said.

“There still could be job losses in the next month or so tied to the pullback in government support, as businesses take stock of their financial position.”

The ABS will also issue its preliminary international goods trade figures for April.

Despite ever-growing political tensions and an iron ore price scaling $200 per tonne, China continues to take Australia’s exports of the red metal in record amounts, hitting $14 billion in March.

In this month’s federal budget, Treasury said it expects the iron ore price could remain elevated for an extended period due to Chinese demand and unresolved supply disruptions in Brazil, another major iron ore exporter.