Westpac – Melbourne Institute Consumer Sentiment Index September 2013

Table 1: Consumer Sentiment Index Sep 2011 Seasonally Adjusted* Trend** 96.9 94.6 Sep 2012 98.2 98.0 Aug 2013 105.7 106.1 Sep 2013 110.6 108.2 % change on % change on Aug-2013 4.7 1.9 Sep-2012 12.7 10.4

See footnote below for discussion on the seasonal adjustment process.

Consumer sentiment rose in September

The Westpac – Melbourne Institute Consumer Sentiment Index rose by 4.7 per cent to 110.6 in September, following a rise of 3.5 per cent in August. This is now the highest reading since December 2010 Four of the five component indices rose in September (see Table 2). The largest increase of 8.7 per cent was recorded by the component index reflecting economic conditions next 12 months, followed by an increase of 7.1 per cent in the component index about economic conditions next 5 years. The component indices about good or bad time to buy major household items and about family finances next 12 months, respectively, rose by 6.9 per cent and 1.6 per cent. On the other hand, the component index about family finances fell by 1.9 per cent. Overall, the current conditions index increased by 3.2 per cent, and the expectations index rose by 5.7 per cent. Increases in consumer sentiment were recorded in most groups disaggregated by demographic characteristics (see Table 3). The biggest increment was reported by the group voting for the Coalition, while the largest fall was observed in the group voting for the Australian Labor party. This month’s survey was conducted in the week where consumers heard news about the RBA maintaining the official cash rate at 2.5 per cent, and news about a 0.6 per cent GDP growth in the June quarter 2013. ‘Economic conditions’ was the top news recalled in the September quarter. News about “interest rates” and “Australian dollar” was the only ‘favourable’ news in the September quarter; news about “international conditions” was the most ‘unfavourable’ (see Table 5)
Chart 1: Consumer Sentiment Index Chart 2: Current Conditions Index minus Expectations Index***

…with increases in four of the five components indices.

130

Index

20

Index

10 110 0 90 -10 SA SA 70 Sep-07 Sep-08 Trend Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 -20 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Trend

_________________________________________________________________________________________________________
**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. © The University of Melbourne, Melbourne Institute of Applied Economic and Social Research Page 1

Table 2: Consumer Sentiment Index – component questions (SA) Sep 2011 Family finances vs a year ago Family finances next 12 months Economic conditions next 12 months Economic conditions next 5 years Good or bad time to buy major h’hold items Current Conditions Index* Expectations Index** 79.8 95.3 85.4 92.2 131.8 105.8 91.0 Sep 2012 78.4 96.2 93.3 98.1 124.9 101.7 95.9 Aug 2013 88.8 113.0 100.3 102.5 123.9 106.3 105.2 Sep 2013 87.1 114.8 109.0 109.8 132.5 109.8 111.2 % change on Aug-2013 -1.9 1.6 8.7 7.1 6.9 3.2 5.7 % change on Sep-2012 11.0 19.4 16.8 12.0 6.1 8.0 16.0

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 Sep 2011 Gender Male Female By age 18-24 25-44 Over 45 By home ownership Tenant Mortgager Wholly owned By Fed. voting intention Coalition ALP By occupation Manager/prof. Paraprof./trades Sales/clerical Lab./operator Not working By household income p.a. Up to $20K $20 to $40K $40 to $60K $60 to $80K $80 to $100K Over $100K By area Metropolitan Non- Metro. 100.0 93.9 111.2 98.7 92.3 103.4 95.0 96.4 86.7 116.7 97.9 101.0 99.8 90.9 94.9 84.5 95.0 93.3 106.2 95.6 101.0 99.0 93.6 Sep 2012 101.7 94.7 95.3 105.1 93.1 107.0 98.2 95.5 86.1 121.1 99.7 90.8 102.4 107.9 95.6 90.0 94.4 94.0 103.7 99.1 105.5 103.3 89.5 Aug 2013 108.8 102.7 137.5 107.9 98.8 110.7 106.4 103.8 91.8 126.9 107.5 113.4 117.6 102.5 97.0 92.6 98.2 107.3 100.7 110.5 111.3 108.8 99.2 Sep 2013 115.9 105.5 136.0 103.5 111.6 108.7 109.7 112.6 109.3 113.7 112.0 115.8 107.9 102.1 110.2 103.0 106.3 110.2 118.7 121.5 107.2 112.4 106.4 % change on Aug-2013 6.5 2.7 -1.1 -4.1 12.9 -1.8 3.1 8.5 19.1 -10.3 4.1 2.2 -8.2 -0.4 13.6 11.2 8.2 2.7 17.8 10.0 -3.7 3.3 7.2 % change on Sep-2012 14.0 11.4 42.6 -1.5 19.8 1.5 11.7 17.9 27.0 -6.0 12.3 27.6 5.3 -5.4 15.3 14.4 12.6 17.3 14.4 22.6 1.6 8.8 18.9

© The University of Melbourne, Melbourne Institute of Applied Economic and Social Research Page 2

30

%

Chart 3: Changes in Consumer Sentiment and Retail Sales Growth
1.2

Chart 4a: Family Finances Last 12 months
%
120 Index SA Trend

20

0.8
100

10 0.4 0
80

-10
% Change in Consumer Sentiment, 1 quarter lead (LHS) Retail Sales Growth, Centred 3 quarters moving averge (RHS)

0.0

-20 Jun-08

Jun-09

Jun-10

Jun-11

Jun-12

-0.4 Jun-13

60 Sep-07

Sep-08

Sep-09

Sep-10

Sep-11

Sep-12

Sep-13

Chart 4b: Family Finances Next 12 months
140 Index 140

Chart 4c: Economic Conditions Next 12 months
Index

120 120 100 100 80 80 SA 60 Sep-07 Trend Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 40 Sep-07

60 SA Trend Sep-09 Sep-10 Sep-11 Sep-12 Sep-13

Sep-08

Sep-08

Chart 4d: Economic Conditions Next 5 years
140 Index

Chart 4e: Time to Buy Major Household Items
160 140 120 Index

120

100

100
80

80
60 SA 40 Sep-07 Trend Sep-09 Sep-10 Sep-11 Sep-12 Sep-13

60 SA 40 Sep-07 Trend Sep-09 Sep-10 Sep-11 Sep-12 Sep-13

Sep-08

Sep-08

*Source: Original Retail Sales deflated by the Consumer Price Index - ABS Catalogue No. 8501.0, Retail Trade: Australia and ABS Catalogue No. 6401.0, Consumer Price Index: Australia.

© The University of Melbourne, Melbourne Institute of Applied Economic and Social Research Page 3

Chart 5: Current Conditions Index
140 Index
140 Index

Chart 6: Expectations Conditions Index

120

120

100

100

80

80

60 SA 40 Sep-07 Trend Sep-09 Sep-10 Sep-11 Sep-12 Sep-13

60 SA Trend Sep-09 Sep-10 Sep-11 Sep-12 Sep-13

Sep-08

40 Sep-07

Sep-08

Chart 7a: Consumer Sentiment by Home Ownership
140 Index 140

Chart 7b: Consumer Sentiment by Income Group
Index

120

120

100

100

80

80

60 Mortgage 40 Sep-07 Sep-08 Home owner Sep-10 Sep-11 Sep-12 Sep-13

60 Less than $20,000 40 Sep-07 Sep-08 Sep-09 $100000+ Sep-10 Sep-11 Sep-12 Sep-13

Sep-09

Chart 7c: Consumer Sentiment by Area
140 Index
140

Chart 7d: Consumer Sentiment by Voting Intention
Index

120

120

100

100

80

80

60 Metro 40 Sep-07 Sep-08 Non metropolitan Sep-09 Sep-10 Sep-11 Sep-12 Sep-13

60 Coalition 40 Sep-07 Sep-08 Sep-09 ALP Sep-10 Sep-11 Sep-12 Sep-13

© The University of Melbourne, Melbourne Institute of Applied Economic and Social Research Page 4

Table 4: Time to buy a Dwelling and Car Indices Sep 2011 Time to Buy a Dwelling Index Time to Buy a Car Index
131.9

Sep 2012
127.6

Jun 2013
143.3

Sep 2013
145.0

% change on Jun-2013 1.1 -3.6

% change on Sep-2012 13.7 5.8

126.3

126.1

138.4

133.4

Chart 8: Time to Buy a Dwelling
160 140 140 120 100 80 100 60 40 Sep-03 80 Sep-03 120 Index 160 Index

Chart 9: Time to Buy a Car

Sep-05

Sep-07

Sep-09

Sep-11

Sep-13

Sep-05

Sep-07

Sep-09

Sep-11

Sep-13

Table 5: News Heard Indices – by topic News Recall Level** Sep 2012 Politics Budget & Taxation Inflation Employment Interest rates Australian Dollar Economic conditions International conditions 8.1 39.8 15.4 20.6 19.4 6.2 72.8 25.5 Jun 2013 4.4 25.2 9.3 14.4 16.5 11.5 57.8 14.6 Sep 2013 10.0 27.9 11.0 13.6 15.6 6.1 52.5 16.5 Sep 2012 46.1 40.5 39.3 34.2 77.4 80.7 39.6 31.1

News Heard Index*** Jun 2013 69.4 60.3 18.9 12.8 109.1 85.2 33.2 44.9 Sep 2013 73.2 67.0 82.9 59.0 120.8 117.2 59.1 53.4

**Proportion of respondents recalling each news topic. ***Percentage who reported that the news was favourable minus percentage unfavourable plus 100.

© The University of Melbourne, Melbourne Institute of Applied Economic and Social Research Page 5

Chart 10a: News Recall Level - March 2013
140
Politics

Chart 10b: News Heard Index
Index

120
Budget & Taxation Inflation Employment Interest rates Australian Dollar Economic conditions International conditions

100 80 60 40 20 Interest rates Inflation Budget & Taxation 0 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13

0

20

40

60

Chart 10c: News Recall Level - June 2013
180
Politics

Chart 10d: News Heard Index
Index Economic conditions Employment Australian Dollar

160
Budget & Taxation Inflation Employment Interest rates Australian Dollar

140 120 100 80 60 40

Economic conditions International conditions

20 0 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13

0

20

40

60

80

Chart 10e: News Recall Level - September 2013
140
Politics

Chart 10f: News Heard Index
Index International conditions 120 Politics

Budget & Taxation

100
Inflation

80
Employment

60
Interest rates Australian Dollar Economic conditions International conditions

40 20 0 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13

0

20

40

60

© The University of Melbourne, Melbourne Institute of Applied Economic and Social Research Page 6

Table 6: Wisest place for savings (per cent of respondents) Sep 2011 Banks Building societies Bonds Shares Real estates Credit union Cash management trust Pay debt Superannuation Spend it Other Don't know Total 37.8 2.6 0.9 7.0 16.8 2.1 1.8 18.7 2.8 4.5 4.6 0.6 100 Sep 2012 39.0 2.8 0.5 5.5 19.8 0.8 0.9 20.4 3.0 3.6 2.5 1.0 100 Jun 2013 34.0 1.6 0.9 8.4 24.6 1.5 2.6 15.7 3.8 4.0 1.7 1.0 100 Sep 2013 29.3 1.1 1.1 8.8 27.5 1.3 1.0 13.8 4.8 5.3 4.9 1.0 100 % change on Jun-2013 -4.6 -0.5 0.2 0.4 2.9 -0.2 -1.7 -2.0 0.9 1.3 3.2 0.0 0 % change on Sep-2012 -9.7 -1.7 0.6 3.3 7.7 0.5 0.1 -6.7 1.8 1.7 2.4 0.0 0

Released: 11 September 2013 Interview period: 2 September – 8 September 2012 Sample size: 1200

Coverage: persons 18 years and over, all states and the ACT. Stratified by gender, age and location.

© The University of Melbourne, Melbourne Institute of Applied Economic and Social Research Page 7

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.  2012The 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)

© The University of Melbourne, Melbourne Institute of Applied Economic and Social Research Page 8

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