Australian consumer confidence jumped to record highs in May, boosted by a heady mix of tax cuts, strong employment, low inflation and stable interest rates, a survey showed on Wednesday.
The Westpac-Melbourne Institute Consumer Sentiment Index climbed 7.5% to 123.9, the highest reading since the survey began in 1975. The index was also 18.8% up on May last year.
"This is an extraordinary result," said Westpac chief economist Bill Evans. "The tax cuts and spending initiatives in the budget represented a very large fiscal stimulus. Consumers have certainly responded to the Treasurer's generosity."
The government's 2007/08 budget last week contained A$31.5 billion (US$26 billion) in tax cuts and A$36 billion in new spending spread over four years.
Other factors supporting sentiment were a record level of share prices; a new 32-year low in the unemployment rate; a stronger Australian dollar and the easing of inflation pressures which have kept the Reserve Bank of Australia on the sidelines, said Evans.
Evans noted there was a huge 18.4% jump in the confidence levels of respondents earning incomes between $40,000 and $60,000 per annum, reflecting the effect of the tax cuts.
Four of the five component indices of consumer sentiment registered improvements in May.
The only fall came in the index measuring family finances compared with a year ago, which declined by 3.7%. However, the good or bad time to buy major household items index still jumped by 7.4% and expectations for finances in the coming 12 months rose 11.7%.
Indices measuring economic conditions for the next 12 months and five years increased by 11.2% and 9.6% respectively.