FIRMS, CONSUMERS MIXED ABOUT AUSSIE ECONOMY

Despite soaring confidence among businesses, users’ sentiment remains in doldrums

AUSTRALIAN companies and consumers are divided as never before over their judgment of the nation’s economy.

Business confidence is powering along and conditions, a measure of hiring, sales and profits, hit a post-2008 crisis high. But consumer sentiment remains in the doldrums.

Pessimists outnumbered optimists for an eighth straight month, data showed yesterday, as heavily indebted households struggle with stagnant wages to make ends meet.

Rarely mentioned among explanations for the above is the Aussie dollar: five years ago the strong currency was a bonanza for consumers who could buy cheap goods from overseas; a 25 per cent depreciation since then has been a boon for exporters but few others.

In addition, while a spike in commodity prices in the past 12 months sent corporate profits surging, almost none of that money has made its way to workers.

“The disparity between business confidence and consumer is really just reflecting the differ- ence in where the income is flowing,” said Gareth Aird, a senior economist at Commonwealth Bank of Australia, noting low interest rates also help.

“But when you look at stuff to do with the consumer, wages, the level of underemployment and so forth, it’s not a surprise that consumer confidence is so weak.”

The Reserve Bank of Australia (RBA) predicts a gradual pickup in pay packets from their current record low pace of growth and officials have expressed surprise that wages aren’t rising faster given their historical response to unemployment of 5.5 per cent. The difference is that underemployment is hovering near a record high and the underutilisation rate, the sum of unemployment and underemployment, is close to its highest since the late 1990s.

RBA governor Philip Lowe last month urged workers to make the case for higher wages to their employers.

In his view, Australia is in a similar funk to other developed nations, where employees are concerned about rising competition from cheaper labour in foreign countries and increasing automation.