Bill Evans

Westpac CEO, Peter King has announced that after more than 30 years as Group Chief Economist, Bill Evans will take on a new role as Senior Economic Advisor for Westpac, effective in January 2024.

Bill Evans has served as Westpac’s Chief Economist since 1991 and is one of the nation’s pre-eminent economic analysts and forecasters. He has led the bank’s economic research and provided valuable insights to Westpac and the broader Australian public.

Mr King says Evans has defined the role of a major bank chief economist in Australia.

“Bill has built a legacy of trust and a record of service that is unmatched. His generosity and ability to explain the economy in clear and simple terms has meant that Australians from all walks of life have benefited from his considerable knowledge and insight.

“Bill joined Westpac in the midst of the 1991 recession and since then has been a trusted voice in Australia through every economic cycle”, Mr King said.

“I’m pleased the Bank and our customers will continue to have the benefit of Bill’s extensive experience and knowledge in his new advisory capacity.”

Luci Ellis appointed as Westpac Group Chief Economist

Luci Ellis has been appointed as Westpac Group’s Chief Economist and will join on 9 October 2023. Luci is one of Australia’s most respected economists and is currently the Assistant Governor (Economic) at the Reserve Bank of Australia, a role she has held since 2016.

Prior to her current role, she was Head of the RBA’s Financial Stability Department for eight years. She has also served as a Deputy Head of the Economic Analysis Department and spent almost two years on secondment at the Bank for International Settlements.

Ms Ellis holds a PhD from the University of New South Wales, a Masters degree in Economics from the Australian National University and a first-class Bachelor of Commerce (Honours) degree from the University of Melbourne.

“We are delighted to welcome Luci to Australia’s oldest bank”, said Westpac CEO Peter King.

“Luci is a highly qualified and respected economist who will build on Bill’s legacy of providing quality economic forecasts for Westpac customers.”

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Bill Evans

The Westpac Melbourne Institute Consumer Sentiment Index increased by 9.4% in April from 78.4 in March to 85.8 in April.

Westpac Chief Economist Bill Evans said: “This strong recovery in the Index can be largely attributed to the decision by the Board of the Reserve Bank to break the sequence of ten consecutive meetings when the cash rate was increased by deciding to pause at the April meeting.

“The survey was conducted over the four days of April 3–6 which covered the Board meeting on April 4.

“While this tightening cycle has been unique in terms of ten consecutive meetings of rate increases the most comparable period was October 2009 to May 2010 when the Board increased rates at every meeting apart from the February meeting. Initially the pause in June was treated sceptically by consumers with Confidence falling a further 5.6%.

“Following a second pause in July consumers became convinced that the pause could be sustained and Confidence increased by a solid 11% – not dissimilar from the result for April 2023.

“Confidence is now at its highest level since June 2022 although still 10.4% below April 2022, the month before the RBA Board began raising the cash rate.

“Despite this lift in April, we still characterise Consumer Sentiment as weak and consistent with Westpac’s view that consumer spending through 2023 and at least the first half of 2024 will be lacklustre.”

Read the report.

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Bill Evans

The Westpac Melbourne Institute Index of Consumer Sentiment fell by 0.9% from 84.4 in September to 83.7 in October.

Westpac Chief Economist Bill Evans said: “The Index remains in deeply pessimistic territory at a level comparable to the lows briefly reached during the pandemic and the extended weakness experienced during the Global Financial Crisis. The key drags on confidence continue to come from a surge in the cost of living, rising interest rates, and concerns about the near- term outlook for the economy.

Notably, the detail suggests the October result could have been significantly worse if the Reserve Bank had chosen to raise the cash rate by 50bps instead of the 25bp it delivered at its October Board meeting. Markets and the media had conditioned households to expect yet another 50bp move in October, following four consecutive 50bp increases in June, July, August, and September.

The survey of 1200 respondents has been conducted over the four days from October 3 to October 6. The Reserve Bank’s cash rate decision was announced at 2:30 pm on October 4. The interviews are typically conducted in the evening. There were 476 interviews on October 3, which are counted as “pre-RBA” with the remaining 724 counted as “post RBA”.

Sentiment amongst those sampled before the RBA decision showed a depressing 77.4 index read, down 8.3% from the print in September. If this had been the overall result for the month it would have been the second weakest since the early 1990s recession, the only weaker read in recent times being when the pandemic shock hit in April 2020.

Clearly, respondents were extremely concerned heading into another prospective 50bp increase in the cash rate.

Sentiment was considerably better amongst those surveyed after the RBA’s smaller than expected move, with an index read of 88.7, up 14.6% compared to those surveyed on the Monday and 5% above sentiment in September.”

Read the report.

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Bill Evans

Overview

The Australian Treasurer will release the Federal Budget on Tuesday March 29. The timing has been brought forward from the traditional second Tuesday in May to accommodate the Federal election – which is due by May.

Here we set out our expectations for the numbers the Government will present in the annual Budget.

These are not our forecasts, but rather our expectation of the Government’s forecasts (as at this point time).

The 2022 Budget will describe a stronger economy around strong wages and employment growth and higher commodity prices boosting national incomes.

The fiscal strategy will pivot now that the unemployment has been successfully reduced and is set to move below 4% for the first time since 1974. The focus shifts from supporting demand, the priority throughout the pandemic, to supporting supply.

Fiscal policy is normalising, just as monetary policy is set to.

New policy initiatives will likely be relatively modest in this Budget, while at the same time assisting with cost of living pressures for those on lower and middle income (this includes those on social benefit payments).

This is surprising, but commendable, given the Government is facing an election and is behind in the opinion polls.

In particular, we do not expect it will extend the $8bn low and middle income offset (LMITO) for another year, despite the fact that the Stage 3 tax cuts are not scheduled to be introduced until 2024/25.

The government is expected to bank the bulk of the windfall from a stronger economy – lowering budget deficits and public debt.

On our figuring, the budget deficit for 2021/22 is lowered to $77.7bn from $99.2bn in MYEFO, a $21.5bn improvement. This is after incorporating $7.5bn in new spending, with a focus on a $4bn cost of living package, which is expected to be distributed before the May election.

Across the four years to 2024/25, there is a $78bn windfall from a stronger economy.

This follows the reported improvement at the May Budget last year of $106bn and a further improvement of $110bn in the December budget update – the Mid Year Economic and Fiscal Outlook (MYEFO).

Of this Budget’s $78bn improvement, $58bn is forecast to be directed to lowering the budget deficit and reducing public debt. There is $20bn in new policy, with a focus on an $8bn package to boost the supply side of the economy.

Read the full report.

By Andrew Hanlan and Bill Evans

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Bill Evans

The Westpac-Melbourne Institute Index of Consumer Sentiment fell by 2.0% to 102.2 in January from 104.3 in December.

The 2% decline compares to the 5.2% drop seen in the first month of the delta outbreak in NSW, a 6.1% drop heading into Victoria’s ‘second wave’ outbreak in 2020 and the 17.7% collapse when the pandemic first hit in early 2020.

Westpac Chief Economist Bill Evans said: “This is a surprisingly solid result given the rapid spread of the omicron COVID variant over the last month.”

While the January sentiment result was resilient overall, responses over the course of the survey week – from January 10 to January 14 – showed a deterioration; suggesting some increased anxiety as the week progressed.

Mr Evans said the state breakdown provides some clues to the resilience of sentiment overall.

“Consumers in states impacted by ‘delta’ lockdowns appear to have been less unsettled by the rapid spread of the omicron variant than those in states experiencing their first major wave of COVID infections,” said Mr Evans.

While confidence increased in NSW (1.7%) and Victoria (4.1%), it posted significant falls in Queensland (–2.7%), Western Australia (–5.1%) and South Australia (–3.9%).

The detailed survey shows increased concerns about the outlook for both the economy and family finances. However, these were partially offset by a strong improvement in actual family finances and a slightly more positive attitude towards major purchases.

Consumers reported a significant improvement in their finances relative to a year ago. This sub-index lifted by 7.5% to 95.6, a nine-month high.

“This likely reflects a combination of improving incomes – particularly as labour markets rebound – wealth gains from a resurgent housing market and the accumulation of significant ‘reserves’ due to very high savings rates during lockdowns over the last two years. The latter, estimated to be worth around $250bn, may now be providing consumers with comfort given the return of virus disruptions.

“These savings will also be important when the omicron threat eases, providing the basis for a strong rebound in spending,” Mr Evans said.

Read the full report.

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Bill Evans

The Westpac-Melbourne Institute Index of Consumer Sentiment fell 5.2% to 107.2 in June from 113.1 in May. The Index has now fallen by 9.7% over the last two months.

According to Westpac Chief Economist Bill Evans, the latest fall in June is almost certainly due to concerns around the two-week lockdown in Melbourne. The survey was conducted during the first week of the lockdown.

The Index is now back at the level we saw in January when the country was impacted by significant lockdowns in parts of Sydney and Queensland. The fall in the Index between the surveys in early January and December – when the country had been comfortably reopening with memories of lockdowns fading – was 4.5%, comparable to the fall we are now experiencing.

In yesterday’s survey we have seen a fall of 7.5% in Victoria, 4% in Queensland, 9% in Western Australia, and 10.9% in South Australia. In contrast, the Index in NSW fell by 1.1% highlighting the confidence the state has in its capacity to contain the virus.

Sentiment in NSW is now 15.4% above Victoria; 11% above Queensland; 19.3% above Western Australia; 14.4% above South Australia and 29.6% above Tasmania.

Bill Evans said: “That resilience in NSW, our largest state, will be very important for supporting national sentiment and, in turn, sustaining the economic recovery.”

Housing-related sentiment continues to show significant signs of stress. The ‘time to buy a dwelling’ index recorded its fifth monthly decline in a row, dropping 7.1% in June to  be 27% below its November level.

Surging prices and rapidly deteriorating affordability are clearly starting to weigh heavily on buyers, suggesting owner occupier activity, particularly first home buyers, is likely to fade.

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Read the report summary.
Read the full report.

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