The sharp drop in the unemployment rate has given Australians an injection of renewed optimism, overcoming the cloud of uncertainty generated by Victoria’s most recent COVID-19 lockdown.
The weekly ANZ-Roy Morgan consumer confidence index has risen 1.3 per cent to 112.4 points, just a shade under its long-running average.
The boost followed last week’s labour force figures, which showed the jobless rate unexpectedly dropping from 5.5 to 5.1 per cent in May, recovering to pre-pandemic levels.
A massive 155,200 people joined the workforce in May – a major positive for job security.
“This strength in the employment data overshadowed news about the emergence of a COVID cluster in Sydney,” ANZ head of economics David Plank said.
Confidence in Sydney rose by 5.2 per cent, gaining 2.8 per cent across the rest of NSW.
The NSW unemployment rate fell to five per cent.
The COVID-19 cluster in in Sydney’s eastern suburbs has so far grown to 11.
“We know from recent experience, however, that sentiment will likely be impacted negatively if the outbreak worsens and greater restrictions are imposed,” Mr Plank said.
Consumer confidence is a pointer to future household spending and has wobbled in recent weeks as a result of the Melbourne shutdown.
Monday’s preliminary retail sales figures for May showed a sharp drop in Victoria as the state entered its fourth lockdown, restraining the national spending result to a mere 0.1 per cent.
Such has been the strength of the labour market recovery from last year’s recession, that economists expect the Reserve Bank to bring forward a hike in the cash rate, rather than wait until 2024.
The Australian Bureau of Statistics will release its latest weekly payroll jobs data later on Tuesday, which will provide a signal as to how the labour market was performing in the early part of June.