‘Feel-good effect’ of same-sex marriage buoys consumers

It hasn’t just helped the wedding planners and the florists: The “feel good factor” of same-sex marriage has had a hand in driving consumer confidence to a four-year high, the latest Westpac Melbourne Institute Index shows.

The monthly survey measures how confident people are in their income stability, economic future and their spending decisions as one of the key indicators for the overall health of the economy.

With an interest rate rise now likely to be off the table until the end of next year and employment numbers continuing to grow, consumers have responded by pushing the index up by 3.6 per cent to 103.3 in December from 99.7 in November.

“This is a surprisingly strong result and confirms the lift we have seen in the index over the last three months,” said Westpac chief economist Bill Evans.

“Also supporting a more positive assessment for respondents’ finances is coverage of the government’s recent speculation around possible tax cuts.”

On Tuesday, Prime Minister Malcolm Turnbull said personal income tax cuts, on top of company tax cuts from 30 per cent to 25 per cent for all businesses, continued to be a priority for his government.

The rhetoric has buoyed consumers who are now expecting their most positive personal finance period in more than two years.

“With the labour market remaining strong respondents are generally more confident about the domestic economy and there is likely to have been a ‘feel good effect’ from the passing of marriage equality legislation,” said Mr Evans.

But shops hopeful of a Christmas rush should temper expectations with the “time to buy a major household item” index still stuck below the long run average of 127.5.

For the first time this year consumers and businesses have traded places, with consumers picking up the slack as businesss confidence struggles on the back of very disappointing household consumption figures in the third-quarter national accounts

Tuesday’s NAB business confidence figures showed that while construction is buoyant, other sectors are becoming increasingly pessimistic – none more so than retail.

“The subdued conditions in retail have been a major concern for some time now,” said NAB chief economist Alan Oster.

Nervous homeowners and hopeful homebuyers expect house prices to continue falling in NSW, with future price expectations down by 24 per cent over the year.

Victoria is catching up both in confidence and in price, with the expectations of future house price rises up by 10 per cent during the same period of time.

“The variations mainly reflect the sharper slowdown in price growth evident in the Sydney market,” said Mr Evans.

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