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Rising consumer confidence and falling unemployment will help drive economic growth
Consumers clearly view the darkest days to be well behind us with the latest Westpac-Melbourne Institute data showing a 5.6 per cent surge in confidence in January.
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Westpac’s chief economist Bill Evans attributes the jump in confidence to the better than expected job data recorded earlier this month.
Figures from the Australian Bureau of Statistics show the unemployment rate fell 0.1 per cent in December to 5.5 per cent, the lowest level since April 2009.
Overall, the number of people unemployed in Australia declined by 10,600 or 1.6 per cent to 639,400, while the number of people in work grew by 35,200 – three times more than economists had predicted.
The Aussie dollar is also tracking well against other major currencies, last month hitting a near decade high against a weak euro and even weaker American dollar.
After eclipsing 94 US cents less than one month ago and 57.65 British pence earlier this month, it seems the Australian dollar has finally come to rest at near record highs of 92 US cents and 56 British pence.
A significant improvement in commodity prices has been one of the biggest contributing factors behind the strong dollar.
Throughout the majority of 2009, commodity prices were incredibly volatile, swinging between record highs and record lows.
But in the last few months of 2009, resurgent Chinese, Indian and Singaporean economies have boosted the demand for Australia’s resources, kept commodity prices high and helped put our nation on the path to a U shaped recovery.
This overall improving outlook, and with core inflation hitting an annual 3.8 percent rate in the third quarter, will undoubtedly put pressure on the Reserve Bank to raise rates when they meet again on 2 February.
The Reserve Bank has already raised rates three consecutive times since October last year and the general consensus among economists is that more immediate rate hikes are likely.
