Ms Anna Burke (Chisholm, Deputy-Speaker) Share this | Link to this | Hansard source

My question is to the Treasurer. Will the Treasurer update the House on the recent assessment of business and consumer confidence and on the economy more generally?

Wayne Swan (Lilley, Australian Labor Party, Treasurer) Share this | Link to this | Hansard source

I thank the member for Chisholm for her question. Last week we received further encouraging news that business and consumer confidence remain strong in the Australian economy. The NAB business survey showed that confidence among Australian businesses remains at levels not seen since 2007. The construction industry was one of the most confident, which reflected the government’s infrastructure stimulus.

Consumer confidence has rebounded strongly over recent months, and that is very encouraging as well. The Sensis consumer survey released last week showed that consumer confidence rose 13 percentage points in the September quarter. The Westpac-Melbourne Institute index of consumer sentiment rose to its highest level since June 2007. That means consumer confidence in Australia is now almost 50 per cent higher than the pre-stimulus levels of October last year. This compares very favourably to what is occurring internationally. For example, the rebound in consumer confidence in Australia is something like more than double the improvement seen in the UK and the US. It is noted in the Reserve Bank minutes published today that confidence in Australia has held up better and recovered more strongly than elsewhere in the world. This reflects the fact that the stimulus has kept customers going through the door and more Australians in work. That is what has provided this vital boost to confidence.

The fact that Australia grew, particularly in the March quarter, gave a very big boost to consumer confidence and business confidence in Australia because it confirmed that Australia was defying global economic gravity—and that has been very, very important. That has given even further confidence to the Australian people. They can see that, by working together, we can get through the worst global recession in over 75 years. Strong confidence is important. Australians understand that the government is gradually unwinding its stimulus. That is very important to a sustainable recovery in the face of what is still a challenging environment. And you see this reflected in the RBA minutes today. They note that:

… economic prospects for most of the developed world were still uncertain and the possibility of another downturn in some countries could not be ruled out.

As the Acting Prime Minister was saying before, that means we must be very cautious as we move forward because there is still an uncertain international environment. The RBA minutes also reflect the approach of the government and the board. The minutes reflect the fact that the board recognises that fiscal stimulus has already peaked and is beginning to taper away. I quote from the minutes again:

Staff estimates suggested that the impact of fiscal policy (including payments to households and other ongoing programs) on GDP growth was likely to have peaked in the June quarter and was now gradually declining.

This means that monetary policy and fiscal policy are working together and heading in the same direction through the economic recovery. This gives all Australians confidence that we can tackle the challenges ahead.