The Westpac-Melbourne Institute Index of Consumer Sentiment surged 11.9% in October which Westpac chief economist, Bill Evans, described as “an extraordinary result with the budget and the outlook for interest rates delivering a clear boost to the confidence of homeowners.”

The index has now lifted by 32% over the last two months, its highest level since July 2018 and 10% above the average level in the six months prior to the pandemic.

“Such a development must be attributable to the response to the October Federal Budget, ongoing success across the nation in containing the Covid-19 outbreak and the expectation that the Reserve Bank Board is likely to further cut interest rates at its next meeting on November 3,” Evans said.

Confidence lifted in all states, surging in NSW by17.5%, although it should be noted this result was before the ICAC revelations.  There were more subdued responses in Queensland (up 7.1%), WA (up 2.4%) and SA (up 9.3%). Another welcome surprise was a solid lift of 13.7% in Victoria to a level now comparable with most states except NSW.

According to Evans all components of the index were higher in October with the most striking improvements around the outlook for the economy. Respondents were also more positive about their family finances. And in what will be welcome news for the retail sector, the ‘time to buy a major item’ sub-index was up by a solid 8.2%, however the level is still lower than December 2019, indicating that households remain cautious about major spending decisions.

“There was also a stunning lift in confidence around job security with the index bouncing back around the levels of early 2019. Despite media warnings about the looming ‘fiscal cliff’ respondents have become markedly more confident about job security. In particular, those over 45 saw a 20% lift in confidence despite job-related measures in the budget only providing specific support for younger employees,” he said.

Confidence in the housing market has also boomed with the ‘time to buy a dwelling’ index increasing 10.6%, its highest level since September 2019.

The latest ANZ-Roy Morgan Consumer Confidence Index also reflected similar results with consumer confident now sitting at its highest level since May.

Driving this week’s increase was more confidence about both personal financial situations and the Australian economy at large over the next year. However, major household buying intentions were mixed with an even split between respondents on whether now is the time to purchase major household items.

ANZ head of Australian Economics, David Plank said consumers have clearly given a ‘thumbs up’ to the budget, with sentiment rising 2.1%,  its highest level since the last weekend of May, and the second best post-budget gain in the last six years. “There were also healthy gains in ‘future finances’ and ‘current’ and ‘future’ economic conditions, but surprisingly, sentiment was weaker in NSW, including Sydney, than in Melbourne. Less surprisingly, confidence was strongest and above neutral in Perth. It was also above neutral in Tasmania and South Australia,” Plank said.