Housing confidence increases as business confidence tumbles

Australia’s two speed economy has caused a drop in business confidence according to the National Australia Bank’s business survey for April-June.

And Westpac/Melbourne Institute’s latest survey of consumer sentiment showed overall sentiment falling 8.3% in July, however confidence in the housing sector increased by 3.3%, reaching its highest level since January 2010

Westpac chief economist Bill Evans attributes the improvement in housing confidence to modest recent falls in house prices, improving affordability.

The survey found the majority of respondents still expect house prices to rise, though Evans notes that the majority has “shrunk noticeably since we last asked the question back in April”.

“Recognition that houses have become a little more affordable might improve sentiment but concerns that prices may fall further are likely to continue to restrain households’ buying intentions,” Evans says.

The improvement in housing market sentiment comes as ABS lending figures for May reveal owner-occupier financing commitments increased by 2.2% to $14 billion on a seasonally adjusted basis, compared to stronger gains for commercial lending (up 8.7%) and personal lending (up 3.8%).

I feel the general confidence of the average Australian is being battered by the continuing conveyor belt of negative media and is unlikely to return some time soon.

NAB’s latest business survey showed that but business confidence slid sharply, slowing employment growth while forward orders eased.

Business conditions were lacklustre in the second quarter as Australia’s economy failed to re-energise after a battering in the opening months of the year from floods, fires and some of the biggest storms on record.

The Australian reports that the starkness of Australia’s two-speed economy was in high contrast in the quarter, with mining the main source of strength, while conditions deteriorated in retail, recreation, construction services, and manufacturing.

While commodity prices remain high, the non-mining sector is being hampered by a strong Australian dollar and a sleepy consumer.

The undisputed bright spot for the economy is business investment intentions, which rose in the second quarter to levels not seen since late-2007.

Our slowing economy should keep interest rates are on hold for now, with the RBA being less likely to be concerned about medium-term inflation risks.


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