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Treasurer sees bright summer ahead

Another hefty drop in employment numbers last week due to COVID-19 restrictions in major states may have been enough to end a five-week rise in consumer confidence.

However, if like some economists who believe the 138,000 slump in jobs in September was “ancient news” with states either opening up after lengthy lockdowns, or about to, a further rise in confidence could be seen.

Treasurer Josh Frydenberg clearly takes the latter view.

“Australians can look forward to a bright summer. Australians know that their economy is resilient in the face of this big economic shock,” Mr Frydenberg told parliament on Monday.

The weekly ANZ-Roy Morgan consumer confidence index – a pointer to future household spending – is released on Tuesday.

The survey was taken at the weekend and may not have captured Victoria’s decision to start easing its restrictions this Friday, following last week’s reopenings in NSW and the ACT.

Confidence aside, the survey has seen an increase in consumer inflation expectations in recent weeks, rising to the highest level since 2014 and coinciding with a steady rise in petrol prices.

The national price for unleaded petrol rose by a further 6.9 cents per litre on average in the past week to 160.7 cents – a 13-year high.

Rising fuel costs are expected to have been a key driver of inflation when the September quarter consumer price index is released next week.

The Reserve Bank of Australia will also release the minutes of its October 5 board meeting.

RBA governor Philip Lowe’s post-meeting statement largely stuck to the script that the central bank won’t lift the cash rate until inflation is sustainably within its two to three per cent target.

Just the day after that meeting, the Australian Prudential Regulation Authority told retail banks they need to raise the serviceability buffer when assessing new loan applications in the face of rising house prices and strong demand for home loans.

“We expect the minutes to elaborate further on its discussions with the Council of Financial Regulators surrounding the housing market and potential financial stability risks,” JP Morgan economists said in a note to clients.

“We don’t expect further macroprudential measures to be implemented until late 2021 or early 2022.”

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