The Westpac Melbourne Institute Index of Consumer Sentiment has increased by 4.7 per cent from 105.7 in August to 110.6 in September.
Westpac chief economist Bill Evans said it is the highest results since December 2010.
“I think it is reasonable to conclude that the election result played an important if not leading role in this strong boost to Consumer Sentiment,” he said.
“The result is comparable with the boost to the Index in March 1996 when the Coalition was returned after 13 years in opposition. On that occasion the Index jumped from 108.0 to 115.0 – a rise of 6.5 per cent. That survey covered March 3 to March 9 following the election on March 2. As a result the whole survey covered a period when the election result was known.
“As a further indicator that the election was a significant factor in today's results we note that over the month the confidence of Coalition voters surged by 19.1 per cent compared to a fall of 10.3 per cent for ALP voters. That compared with comparable changes in 1996 of +25.3 per cent and –17.2 per cent respectively when the full result was known for the entire survey.”
At the same time, Evans said the September increases also indicate the Reserve Bank’s series of rate cuts since November 2011 are finally gaining traction. This is exemplified by the increase in confidence in buying conditions with the sub-index tracking views on ‘time to buy a major household item’ up 6.9 per cent.
Confidence is also high around the housing market. The sub-index tracking assessments of "whether now is good time to buy a dwelling" jumped 6.5 per cent to its highest level since August 2009.
Evans has predicted at the next board meeting, Reserve Bank will keep rates on hold.
“There are a number of aspects to this survey that will give the Board encouragement that the series of rate cuts, complemented by the confidence boost from the election make policy settings about right,” he said.
“However conditions around the labour market; business investment; and actual consumer spending are still soft and the Board will require more time to assess the underlying strength of the economy.”