Westpac – Melbourne Institute Consumer Sentiment Index

December 2009
Table 1: Consumer Sentiment Index
Dec Dec Nov Dec % change on % change on
2007 2008 2009 2009 Nov 2009 Dec 2008
Seasonally Adjusted* 112.5 92.0 118.3 113.8 -3.8 23.7
Trend** 108.7 89.1 117.8 116.0 -1.5 30.2
See footnote below for discussion on the seasonal adjustment process.

Consumer The Westpac – Melbourne Institute Consumer Sentiment Index decreased by 3.8 per cent to 113.8 in
sentiment fell December from 118.3 in November. This is the second month the index fell. But, the number
for the second optimists still dominate pessimists.
month
All five component indices fell in December (see Table 2) with the largest decrease of 7.2 per cent
registered by the component index reflecting economic conditions next 12 months, followed by 6 per
…with further cent decline in family finances next 12 months. Overall, the expectations index declined by 4.9 per
declines in all cent to 117.0 and the current conditions index fell by 2.1 per cent to 109.0.
five component
indices Decreases in consumer sentiment were recorded in most groups disaggregated by demographic
characteristics (see Table 3) except for the age group between 18 and 24 years, the home rental group,
and the occupation group of labourers and operators.

This month’s survey was conducted in the week where the RBA increased the official cash rate by
0.25 per cent. The top news recall in December was ‘economic conditions’, followed by ‘interest
rates’, while the news heard index decreased for all topics except for ‘employment’ (see Table 5).

Chart 2: Current Conditions Index minus

Chart 1: Consumer Sentiment Index Expectations Index***
Index Index
135 20
Optimists - pessimists +100

10
115

95
-10
SA Trend
75 -20
Dec-03 Dec-05 Dec-07 Dec-09 Dec-03 Dec-05 Dec-07 Dec-09
_________________________________________________________________________________________________________

* In June 2006 we moved to reporting seasonally unadjusted series after we conducted a series of tests on the data which indicated no statistical evidence
of seasonality. However, further research showed that the January monthly changes were, in general, significantly larger than the average monthly changes
for the rest of the year. Consequently, we have adopted a new methodology to filter the raw data for the regular large monthly movements in January. This
new filtered series is our new seasonally-adjusted (SA) CSI.
**Trend for the latest month is based on 2-month moving average while the rest are based on 3-month centred moving average.
***The difference between these two indices provides an indication of consumers’ perception of the state of the economy now and in the future. A
positive (negative) value implies that consumers view current conditions more (less) favorably compared to the future.

© 2009 The University of Melbourne, Melbourne Institute of Applied Economic and Social Research
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Table 2: Consumer Sentiment Index – component questions (SA)
Dec Dec Nov Dec % change on % change on
2007 2008 2009 2009 Nov 2009 Dec 2008
Family finances vs a year ago 103.0 74.3 92.8 91.0 -1.9 22.5
Family finances next 12 months 112.4 111.1 117.6 110.6 -6.0 -0.5
Economic conditions next 12 months 124.1 71.4 128.1 118.9 -7.2 66.5
Economic conditions next 5 years 104.5 97.6 123.2 121.5 -1.4 24.5
Good or bad time to buy major h’hold items 118.3 105.4 129.9 126.9 -2.3 20.4
Current Conditions Index* 110.6 89.9 111.3 109.0 -2.1 21.3
Expectations Index** 113.7 93.4 123.0 117.0 -4.9 25.3
Percentage who reported that they were optimistic minus the percentage who reported that they were pessimistic plus 100.
*Average of the two component indices that relate to current conditions.
**Average of the three component indices that relate to expected conditions.

Table 3: Consumer Sentiment Index – by demographic characteristics (SA)

Dec Dec Nov Dec % change on % change on
2007 2008 2009 2009 Nov 2009 Dec 2008

Gender Male 116.2 96.3 123.3 120.6 -2.1 25.3

Female 108.9 87.8 113.7 107.3 -5.6 22.1
By age 18-24 127.1 100.3 123.7 131.8 6.5 31.5
25-44 112.5 95.8 119.9 113.3 -5.5 18.3
Over 45 108.8 86.7 115.8 110.1 -4.9 27.0
By home ownership Tenant 116.6 99.7 115.5 117.4 1.6 17.7
Mortgagee 108.0 93.1 119.7 109.1 -8.9 17.2
Wholly owned 113.4 87.0 120.8 115.9 -4.1 33.2
By Fed. voting intention Coalition 104.2 84.8 111.2 108.5 -2.4 28.0
ALP 121.0 98.9 124.4 122.5 -1.6 23.8
By occupation Manager/prof. 115.2 93.3 122.2 120.0 -1.8 28.6
Paraprof./trades 116.4 87.5 119.3 115.4 -3.3 31.9
Sales/clerical 111.1 101.1 120.8 112.9 -6.6 11.7
Lab./operator 101.9 94.3 114.2 116.6 2.1 23.7
Not working 110.6 88.8 115.1 107.1 -7.0 20.6
By household income p.a. Up to $20K 103.0 92.3 106.0 97.6 -7.9 5.7
$20 to $40K 106.9 90.4 114.6 113.2 -1.2 25.2
$40 to $60K 113.8 91.5 118.2 103.8 -12.2 13.4
Over $60K 116.7 95.1 124.1 121.3 -2.3 27.6
By area Metropolitan 114.5 93.7 119.3 115.4 -3.2 23.2
Non- Metro. 109.7 89.6 115.9 110.6 -4.5 23.5

© 2009 The University of Melbourne, Melbourne Institute of Applied Economic and Social Research
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 Chart 3: Changes in Consumer Sentiment and Chart 4a: Family Finances Last 12 Months
Retail Sales Growth
Index
% Seasonal adjusted, centred 3 month % change, 1 120 120
moving average, 03/04 prices quarter lead
2.4
17

12 100 100
1.4
7

0.4 2

-3
80 80

-0.6 -8
Retail sales growth (LHS)
Trend SA
Quarterly change in consumer sentiment (RHS) -13
60 60
-1.6 -18
Dec-03 Dec-05 Dec-07 Dec-09
Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09

Chart 4b: Family Finances Next 12 Months Chart 4c: Economic Conditions Next 12 Months
Index Index
140 140 140 140

120 120

120 120
100 100

80 80
100 100
60 Trend SA 60
Trend SA
40 40
80 80
Dec-03 Dec-05 Dec-07 Dec-09
Dec-03 Dec-05 Dec-07 Dec-09

Chart 4d: Economic Conditions Next 5 Years Chart 4e: Time to Buy Major Household Items
Index Index
140 140 160 160

140 140
120 120

120 120
100 100
100 100

80 80
80 80
Trend SA Trend SA

60 60 60 60
Dec-03 Dec-05 Dec-07 Dec-09 Dec-03 Dec-05 Dec-07 Dec-09

© 2009 The University of Melbourne, Melbourne Institute of Applied Economic and Social Research
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 Chart 5: Current Conditions Index Chart 6: Expectations Index
Index Index
140

Optimists - pessimists +100

Optimists - pessimists +100

130

120
110

100
90

SA Trend SA Trend
70 80
Dec-03 Dec-05 Dec-07 Dec-09 Dec-03 Dec-05 Dec-07 Dec-09

Chart 7a: Consumer Sentiment by Home Chart 7b: Consumer Sentiment by Income
Index
Ownership (SA) Index Group (SA)
Index Index
140 140 140 140

120 120 120 120

100 100 100 100

80 80 80 80
Less than $20,000 $60,000+
Mortgage Home owner
60 60 60 60
Dec-03 Dec-05 Dec-07 Dec-09 Dec-03 Dec-05 Dec-07 Dec-09

Chart 7c: Consumer Sentiment Chart 7d: Consumer Sentiment by Voting

by Area (SA) Index Intention (SA) Index
Index Index 160 160
140 140

140 140
120 120
120 120
100 100
100 100

80 Metro 80
80 80
Non metropolitan Coalition ALP

60 60 60 60
Dec-03 Dec-05 Dec-07 Dec-09 Dec-03 Dec-05 Dec-07 Dec-09

© 2009 The University of Melbourne, Melbourne Institute of Applied Economic and Social Research
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Table 4: Time to buy a Dwelling and Car Indices
Dec Dec Sep Dec % change on % change on
2007 2008 2009 2009 Sep 2009 Dec 2008
Time to Buy a Dwelling Index 81.0 136.8 144.9 127.0 -12.3 -7.2
Time to Buy a Car Index 121.2 118.6 139.1 132.7 -4.6 11.9

Chart 8: Time to B uy a Dw elling and Chart 9 : Time to Buy a Car

D welling Approvals* Inde
Index
Index , 3 quarter Number, 160 160
lead seasonally adjusted
200 60000

140 140
160 50000

120 40000 120 120

80 30000
100 100
Time to buy a dwelling (LHS)
40 20000
Private sector dwelling approvals (RHS)
0 10000 80 80
D ec 99 Dec 01 Dec 03 D ec 05 Dec 07 Dec 09 Dec 99 Dec 01 Dec 03 Dec 05 Dec 07 Dec 09

Table 5: News Heard Indices – by topic

News Recall Level** News Heard Index***
Dec 2008 Sep 2009 Dec 2009 Dec 2008 Sep 2009 Dec 2009

Politics 3.6 4.6 5.9 63.6 124.1 82.1

Budget & Taxation 11.8 21.5 19.9 71.3 125.9 53.2
Inflation 15.6 12.0 15.6 63.1 98.4 63.2
Employment 9.3 12.9 9.2 15.3 75.1 86.5
Interest rates 56.5 32.6 43.2 89.4 93.8 62.4
Australian Dollar 8.0 3.7 4.8 51.5 110.2 92.6
Economic conditions 90.2 69.2 54.7 33.8 137.5 100.5
International conditions 25.9 16.3 19.3 26.1 112.9 86.3

**Proportion of respondents recalling each news topic.

***Percentage who reported that the news was favourable minus percentage unfavourable plus 100.
*Source: ABS Catalogue No. 8731.0, Building Approvals: Australia.

© 2009 The University of Melbourne, Melbourne Institute of Applied Economic and Social Research
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 Chart 10b: News Heard Index
Chart 10a: News Recall Level - June 2008
140 140
International conditions
120 120
Economic conditions
100 100
Australian Dollar
80 80
Interest rates
60 60
Employment

40 40
Inflation

20 20
Budget & Taxation Budget & Taxation Inflation Interest rates

0 0
Politics
Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09

0 10 20 30 40 50 60 70 80 90

Chart 10d: News Heard Index

Chart 10c: News Recall Level - September 2008

160 160
International conditions
140 140
Economic conditions
120 120
Australian Dollar
100 100
Interest rates 80 80

Employment 60 60

Inflation 40 40

20 Employment Australian Dollar Economic conditions 20

Budget & Taxation
0 0
Politics
Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09
0 10 20 30 40 50 60 70 80

Chart 10f: News Heard Index

Chart 10e: News Recall Level - December 2008

140 140
International conditions
120 120
Economic conditions
100 100
Australian Dollar
80 80
Interest rates
60 60
Employment
40 40
Inflation
20 20
Budget & Taxation Politics International conditions

0 0
Politics Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09

0 10 20 30 40 50 60

© 2009 The University of Melbourne, Melbourne Institute of Applied Economic and Social Research
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Table 6: Wisest place for savings (per cent of respondents)
Dec Dec Sep Dec % change on % change on
2007 2008 2009 2009 Sep 2009 Dec 2008
Banks 22.3 36.9 26.7 29.0 2.3 -7.8
Building societies 1.8 1.0 2.2 2.0 -0.2 1.0
Bonds 1.4 1.3 1.0 1.2 0.2 -0.1
Shares 14.6 8.1 13.4 10.5 -2.9 2.4
Real estates 21.1 13.4 15.6 18.5 2.9 5.1
Credit union 1.0 2.0 1.8 2.3 0.5 0.4
Cash management trust 2.0 1.3 1.0 0.9 -0.1 -0.4
Pay debt 12.9 23.0 25.5 20.7 -4.8 -2.3
Superanuation 7.2 2.6 5.0 5.1 0.1 2.5
Spend it 4.9 3.8 5.6 5.6 -0.1 1.7
Other 9.3 5.1 1.7 4.0 2.3 -1.2
Don't know 1.5 1.4 0.4 0.2 -0.1 -1.2
Total 100 100 100 100 0 0

Released: 9 December 2009 Coverage: persons 18 years and over, all states and the ACT.
Interview period: 30 November - 6 December 2009 Stratified by gender, age and location.
Sample size: 1200

© 2009 The University of Melbourne, Melbourne Institute of Applied Economic and Social Research
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Westpac – Melbourne Institute
Survey of Consumer Sentiment

The Westpac – Melbourne Institute Survey of Consumer Sentiment index has been designed as a trend-less variable that provides an indication of
the level of and shifts in consumer sentiment over time. The index is an average of five component indexes which in turn reflect the balance of
favourable and unfavourable responses to five survey questions. These questions relate to family finances a year ago and in the next 12 months,
economic conditions in the next 12 months and next 5 years, and good or bad time to buy major household items. An index level of 100 indicates
that the balance of confidence or optimism is equally weighted, while an index of greater than 100 indicates that optimists outnumber pessimists.

The consumer sentiment index has been found to be a good predictor of economic activity.

Disclaimer: Westpac Banking Corporation, the University of Melbourne and the Melbourne Institute give no representation, make no warranty,
nor take any responsibility as to the accuracy or completeness of any information contained herein and will not be liable in contract tort, for
negligence or for any loss or damage arising from reliance on any such information. The Westpac–Melbourne Institute Survey of Consumer
Sentiment report presents the results of a survey of more than 1200 households, together with the professional analysis and views of the
Melbourne Institute. These views and findings do not necessarily coincide with those of the Westpac Banking Corporation.

For information on the data contained in the report contact the Melbourne Institute, The University of Melbourne, on (03) 8344 2196.

 2009 The University of Melbourne, Melbourne Institute of Applied Economic and Social Research
This report is copyright. Apart from any fair dealing for the purposes of study, research, criticism or review, as permitted under the Copyright Act,

no part may be reproduced without written permission.

ISSN 1836-4217 (Online)

© 2009 The University of Melbourne, Melbourne Institute of Applied Economic and Social Research
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