Australia's consumer confidence took a hit last week but remains significantly higher since the release of the 2015 Federal Budget earlier this month.
The weekly ANZ-Roy Morgan index of consumer confidence fell 1.0% to 113.5 points in the week ended 24 May, but remains 4.4% higher over the past three weeks and 14.3% better than this time last year. It also compares to a four-week average of 111.9 points and a monthly average of 112.7 since the series began in 1990.
Although the latest survey recorded a marginal decline in overall confidence levels for the week, investors have still responded warmly to the results having pushed the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) 0.7% higher just before noon.
Unsurprisingly, the upward charge was led by some of the nation's leading retailers, including JB Hi-Fi Limited (ASX: JBH), Harvey Norman Holdings Limited (ASX: HVN) and Dick Smith Holdings Ltd (ASX: DSH), which are all expected to be amongst the key beneficiaries from the budget changes. The trio have risen 0.7%, 2.6% and 1.1% just before noon, respectively.
Myer Holdings Ltd (ASX: MYR), Woolworths Limited (ASX: WOW) and Wesfarmers Ltd (ASX: WES) were all jumping as well. Myer has risen 1.7%, while the supermarket behemoths lifted 0.3% and 0.7% each.
While the government's second Federal Budget is no doubt having a more positive effect on consumer confidence than it was in 2014, the Reserve Bank of Australia's two interest rate cuts so far this year are likely also having a positive impact on overall economic confidence.
In order for this confidence to be sustained ANZ's chief economist Warren Hogan said that key measures must succeed in being passed through parliament, while job creation and a falling unemployment rate are also necessary. He added: "As a key driver of employment, the outlook for business investment is now one of the main factors influencing consumer confidence in Australia."
Data on business expenditure (past and expected) will be released on Thursday, which will be closely scrutinised by the market and could play a role in the direction that the RBA chooses to take on monetary policy in the future.
