CSI1008

Westpac – Melbourne Institute Consumer Sentiment Index
August 2010
Table 1: Consumer Sentiment Index
Aug Aug Jul Aug % change on % change on
2008 2009 2010 2010 Jul 2010 Aug 2009
Seasonally Adjusted* 86.2 113.4 113.1 119.2 5.4 5.1
Trend** 85.8 114.1 111.4 116.1 4.3 1.8
See footnote below for discussion on the seasonal adjustment process.
Consumer The Westpac – Melbourne Institute Consumer Sentiment Index rose by 5.4 per cent in August to
Sentiment 119.2 from 113.1 in July. The index is now at a confidence level similar to that at the beginning of the
firms in year.
August
In this month, the largest increase of 8.6 per cent was recorded by the component index about
economic conditions next 12 months. This was followed by increases of 6.1 per cent and 5.7 per cent,
respectively, for the component indices about family finances next 12 years and family finances vs a
…with
year ago. While there was improvement in all five component indices over the last two months, the
increase in
component index reflecting family finances vs a year ago is still below 100 and has been since
all
January 2008. Overall, the current conditions index rose by 4.4 per cent, and the expectations index
component
increased by 6.0 per cent.
indices
Increases in consumer sentiment were recorded in all groups disaggregated by demographic
characteristics (see Table 3) except for the income group between $40K and $60K, and for the home
ownership group with wholly owned home.
This month’s survey was conducted in the week where consumers heard news about the RBA leaving
the official interest rate unchanged at 4.5 per cent.
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
Aug-04 Aug-06 Aug-08 Aug-10 Aug-04 Aug-06 Aug-08 Aug-10
_________________________________________________________________________________________________________
* 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.
© 2010 The University of Melbourne, Melbourne Institute of Applied Economic and Social Research
Page 1
Table 2: Consumer Sentiment Index – component questions (SA)
2008 2009 2010 2010 Jun 2010 Aug 2009
Family finances vs a year ago 75.1 82.8 90.4 95.5 5.7 15.4
Family finances next 12 months 102.6 121.1 112.2 119.0 6.1 -1.8
Economic conditions next 12 months 72.2 113.3 117.0 127.1 8.6 12.2
Economic conditions next 5 years 89.2 123.1 111.9 115.5 3.2 -6.2
Good or bad time to buy major h’hold items 91.8 126.9 134.1 138.8 3.5 9.4
Current Conditions Index* 83.5 104.8 112.2 117.2 4.4 11.8
Expectations Index** 88.0 119.2 113.7 120.5 6.0 1.1
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)

2008 2009 2010 2010 Jul 2010 Aug 2009
Gender Male 91.9 118.1 118.4 123.2 4.1 4.3

Female 80.6 108.9 108.1 115.3 6.6 5.9
By age 18-24 108.7 110.9 129.7 130.7 0.8 17.8
25-44 85.8 119.0 115.4 125.3 8.6 5.3
Over 45 81.4 109.4 107.4 111.5 3.9 2.0
By home ownership Tenant 96.3 104.7 114.7 126.4 10.2 20.7
Mortgagee 81.3 116.2 110.2 121.5 10.2 4.6
Wholly owned 86.4 114.0 114.4 113.4 -0.9 -0.5
By Fed. voting intention Coalition 79.9 111.7 108.0 110.2 2.1 -1.4
ALP 90.3 119.9 125.1 129.8 3.8 8.3
By occupation Manager/prof. 88.8 115.1 117.6 121.5 3.4 5.6
Paraprof./trades 88.1 113.8 113.0 117.7 4.1 3.4
Sales/clerical 81.4 110.8 114.5 127.7 11.5 15.3
Lab./operator 89.4 122.5 116.7 125.2 7.3 2.2
Not working 84.3 111.0 108.8 112.8 3.7 1.6
By household income p.a. Up to $20K 84.6 110.8 96.9 113.4 17.0 2.3
$20 to $40K 83.7 99.9 112.0 114.8 2.5 15.0
$40 to $60K 77.5 109.3 113.2 112.7 -0.4 3.1
Over $60K 90.6 119.4 117.7 123.2 4.7 3.2
By area Metropolitan 85.3 112.8 116.1 120.4 3.7 6.7
Non- Metro. 87.9 115.1 107.1 116.5 8.7 1.2
Page 2
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
Trend SA
Retail sales growth (LHS)
-13
Quarterly change in consumer sentiment (RHS)
60 60
-1.6 -18
Aug-04 Aug-06 Aug-08 Aug-10
Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10
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
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
*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.
Page 3
Chart 5: Current Conditions Index Chart 6: Expectations Index
Index Index
140
130

120
110
100
90
SA Trend SA Trend
70 80
Chart 7a: Consumer Sentiment by Home Chart 7b: Consumer Sentiment by Income
Ownership (SA) Group (SA)
Index Index 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
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
Released: 11 Aug 2010 Coverage: persons 18 years and over, all states and the ACT.
Interview period: 2 August – 8 August 2010 Stratified by gender, age and location.
Sample size: 1200
Page 4
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.
 2010 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)
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Westpac – Melbourne Institute Consumer Sentiment Index

Chart 2: Current Conditions Index minus

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

Gender Male 91.9 118.1 118.4 123.2 4.1 4.3

120 120 100 100

Optimists - pessimists +100

Optimists - pessimists +100

120 120 120 120

100 100 100 100

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

ISSN 1836-4217 (Online)

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