Fed: Surge in consumer sentiment ahead of khaki Budget

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Fed: Surge in consumer sentiment ahead of khaki Budget

By Shane Wright

CANBERRA, April 16 AAP - A huge surge in consumer sentiment today gave the federalgovernment good news ahead of a looming federal Budget heavy with defence and securityspending.

The Westpac-Melbourne Institute index of consumer sentiment recorded its fourth largestrise in 28 years this month, climbing eight per cent on the back of the apparent end ofwar in Iraq.

The index, which gives an indication of consumers feeling about the economy, had fallennine per cent since the start of the year, largely due to the uncertainty of the war.

But with the regime of Saddam Hussein gone, and the price of petrol slipping eightper cent, consumers are upbeat about the rest of the year.

Westpac's head of economics Bill Evans said improvement in consumer sentiment was almostall due to the end of the war, as there were still dark clouds over the world economy.

"Confidence is around eight per cent above long term average, indicating a reasonablybuoyant consumer," he said.

"Low interest rates, increased wealth through rising house prices and very low unemploymentsupport this outlook."

Mr Evans said the index's improvement would give some comfort to the Reserve Bank thatthe domestic economy was going along strongly.

He said it was likely that consumer spending, a key driver of economic activity, wasgrowing around three per cent per annum.

New merchandise import figures seemed to confirm the index, with a $500 million increaseto $10.7 billion in March.

After two months of falls, imports rebounded across most sectors, including fuels (up$300 million to $1.021 billion), machinery and transport equipment (up $200 million to$4.64 billion) and food and live animals (up $23 million to $429 million).

In Canberra, the government is continuing to work through the last details of the Budgetwhich will be delivered by Treasurer Peter Costello on May 13.

Prime Minister John Howard said the Budget wold be in tune with the current politicaland economic conditions.

"It will be framed at a time when we've had to spend more money on defence and securityand we're also aiming to keep it in surplus," he told Melbourne radio 3AW.

"The Australian economy, although it's a little softer now than it was a year ago,is still performing extremely well and is holding up very strongly compared with othersand we want to do everything in this Budget to keep that process going."

Mr Howard said the government would announce within a fortnight when Australia's troopswould return from Iraq.

The troop deployment is one of the biggest single expenses hitting this year's Budget.

AAP sw/sb/hu/de

KEYWORD: ECONOMY NIGHTLEAD