Australian consumers continue to be cautious on spending: report

15:18, April 13, 2011      

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A survey on Wednesday showed Australian consumer confidence slightly rose this month, but it was solely driven by improved sentiment in regional areas.

Westpac's Melbourne Institute Index of Consumer Sentiment rose 1.2 percent in April in comparison to last month.

However, the small rise was driven entirely by a 12.2 percent confidence surge among non-metropolitan residents, while city- dwellers' confidence fell 4.6 percent.

According to Westpac's chief economist Bill Evans, some of the factors improving rural confidence, such as rising food prices, are among those hurting consumer confidence in the cities.

"High debt levels, fragile house prices, sharp increases in interest rates over the last 12 months, and rising health, utility and education costs are unnerving them (city-dwellers)," Evans told ABC News Online on Wednesday.

"Food prices would be another factor there in terms of the stress on their budgets that would be impacting their confidence."

The index also showed consumers who believe this is a good time to buy a major household item has surged 29 percent above its level two years ago.

Evans said factors such as the high Australian dollar and heavy retailer discounting of non-essential items, such as electronics and clothing, mean consumers see now as a good time to buy, but he said that has not translated to increased spending.

"They're not spending because of the link between their concerns about their own financial position," he said.

"That can really only recover with an extended period of flat interest rates, some confidence coming back into the housing market so they're not worried that their major asset is at risk of falling in value. And that's going to take time and, unfortunately, between that period and now we're likely to see the Reserve Bank tapping on the interest rate brakes again, so I am not too confident about the consumer for some time to come."

Source: Xinhua
 
 
     
 
 
 
     
 
 
 
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