Australia's continued economic recovery has fuelled a surge in spending, major bank says
Home buying picked up in November, along with retail, travel and vehicle consumption as the economy continued to recover from the financial slowdown caused by the COVID-19 pandemic, according to new data from Commonwealth Bank.
CBA chief economist Stephen Halmarick said that the record-low interest rates and higher savings deposits prompted by the Reserve Bank’s easing of monetary policy has boosted consumer confidence. That boost in confidence, in turn, has fuelled a surge in spending, according to a report by The Sydney Morning Herald.
“Home-buying spending intentions jumped higher last month, which was consistent with our expectations that the improvement in the Australian economy and the further interest-rate cuts associated would see a restrengthening og the home-buying market,” Halmarick told the Herald. “Retail spending intentions also rose in November, with the reopening of the Victorian economy helping drive ongoing recovery in consumer spending.”
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Australians have saved more than $100 billion since the onset of the COVID-19 pandemic. Halmarick said that increase in savings has boosted expenditure levels – which usually fall during an economic crisis.
Home-buying was up 2.4% year over year in November, according to CBA data. Economists at the bank expect spending levels to remain elevated next year. The bank predicted that GDP would rise 4.2%, and that Australia’s economic contraction from the pandemic to be limited to negative 2.8%, the Herald reported.
Halmarick also said that labour market conditions during the pandemic didn’t deteriorate as severely as first predicted, and had driven a significant rebound in the residential housing market. The bank initially predicted a 10% peak-to-trough dive in property prices due to the pandemic, but is now projecting only a 3% drop.
“The growth in spending intentions in a number of key sectors indicates that the economic recovery is well under way,” Halmarick said. “The signs for December are also looking good based on our weekly credit and debit card spend data.”
