As the new financial year kicks off, consumer confidence remains in the doldrums. What flow-on effects will this have on the property market? AMP
chief economist Shane Oliver has told Australian Broker TV that a great deal rests on the incoming budget measures.
“There’s no doubt that the budget – not so much the dollar values in the budget, but all the talk about welfare cutbacks, increasing retirement age, all those things – that’s affected confidence,” he said.
Oliver said business confidence has thus far “held up pretty well”, but that consumer confidence has taken a significant hit.
“There is a risk that could affect demand for housing over the next few months,” he said.
Click here to view Shane Oliver's full interview.
But Oliver argued that consumer confidence should begin to see a comeback as the budget takes on its final form.
“My feeling, though, is that if the budget is going to get through the Senate, the government will have to soften a lot of those measures. So a lot of the hit to confidence will gradually fade over the next few months,” Oliver said.
When it comes to interest rates, Oliver predicts unemployment numbers will keep the RBA
“In the very short term, we’re still in an uncertain phase for the Australian economy. The mining investment boom is winding down, other sectors of the economy, like housing construction, have picked up. But we’re still in an environment where I think unemployment will remain around the 6% level, probably over the remainder of this year. Probably next year unemployment will start to come off as the economy picks up pace. Against that backdrop, I think the Reserve Bank will leave interest rates on hold.
They feel that they’ve cut interest rates enough, and they’re down at record lows, but there’s still uncertainty about the economy so they’re not going to be jacking rates up any time soon. I think probably it will be another six months of rates being on hold, then maybe some time through next year – probably by the end of March – we’ll start seeing interest rates head up again.”
This article is from Australian Broker issue #11.15. Download the issue to read more.