Consumer confidence on rise

Consumer confidence is up in most parts of the economy and, notably, there is a sizeable gain in confidence in rural households, Westpac senior economist Satish Ranchhod says.

The Westpac McDemott Miller Consumer Confidence Index was up 5.2 points in December, to 113.1 - the largest increase in four years.

The December increase followed a modest increase in September, leaving confidence slightly above its long-run average.

``The pick-up in confidence comes on the back of an economy that is humming along.''

Economic growth figures due out on Thursday were expected to show the economy expanded by a ``healthy'' 3.6% in the past year, supported by low interest rates, a large pipeline of construction, rapid population growth and strong tourist numbers, he said.

Importantly, the strength in economic conditions had been passing through to an improving labour market where the number of full-time equivalent employees was up 3.3% in the past year.

``Against this backdrop, it's not surprising households are feeling more upbeat.''

Looking at the underlying details of the survey, households had become more optimistic about where the economy was headed in the coming year. They were also feeling more upbeat about their own financial situation, Mr Ranchhod said.

Export prices for dairy products had surged in recent months. As a result, cash flows for most farmers would be headed back into the black. However, Mr Ranchhod did not expect to see a big rebound in farm-related investment and spending just yet. Many farmers would have taken on additional debt in recent years to carry them through the period of low prices and that would need to be repaid.

There was also a strong rise in confidence among those households earning less than $50,000 a year, probably reflecting the strengthening of the labour market.

Although households were feeling more upbeat than earlier in the year, they were still keeping an eye on their spending, he said.

The number of households thinking now was a good time to purchase a major household items was steady in December, lingering at below-average levels.

There was also a fall in the number of households who said they would spend a cash windfall. It would be worth watching to see if the prudence was sustained into next year, Mr Ranchhod said.