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Increased spending bodes well for the economy

By Greg Bell

Spending levels across the Australian economy have remained elevated for some time now, bringing some much-needed relief at a time of volatility. The more willing people are to spend – and the level of their expenditure – will have a knock-on effect for various aspects of the national balance sheet, so it's hardly surprising that this is an area policymakers are keeping a close eye on.

The latest Commonwealth Bank Business Sales Indicator (BSI) gives insight into just how happy people are to spend, and where they're spending it. The results suggest that now could be a good time to take a closer look at buying commercial property on the Gold Coast, as there's been an uplift in confidence that has translated into greater spending power among consumers.

How people's spending is faring

The April BSI showed a 0.2 per cent rise in spending across the economy, making it the 15th month in a row in which an increase was registered. What's also significant is that the rise was stronger than it had been recently – the average over the past three months stood at just 0.1 per cent.

CommSec chief economist Craig James explained that while the results might be "modest", they nevertheless show some signs of positivity for the national economy.

"The recent interest rate reduction suggests that the BSI will lift further in coming months, though the federal election may result in businesses checking their spending plans," Mr James commented.

Taking consumer confidence into account

May's cash rate reduction has already had a positive impact on consumer confidence, so Mr James' assessment of the situation might not be far off the mark. The ANZ-Roy Morgan Australian Consumer Confidence Index for the week to 24 May showed recent gains had continued, with the reading improving 0.5 per cent over the past week.

This has the potential to deliver advantages to companies who are already leasing retail property on the Gold Coast, as they're perhaps best placed to make the most of this upswing in sentiment. Analysts suggested that people are still feeling buoyant after the decision earlier in the month to reduce the cash rate by 0.25 per cent.

Senior economist at ANZ Jo Masters explained that the index is now 2.6 per cent higher than its long-run average, as "a number of positive factors [are] coming into play".

"Interestingly the current election campaign does not appear to be unnerving consumers despite the fact that the polls remain close," Ms Masters continued.

"With another five weeks left in the election campaign, confidence remains vulnerable to any key developments."

How well the Gold Coast is performing

The BSI also offers state-by-state results to see how certain parts of the country are faring compared to others. There were only two states where spending declined in April – Victoria and the Northern Territory.

Queensland ranked midway on the table, registering a 0.3 per cent increase in spending from the previous month. New South Wales came out on top with a 0.8 per cent rise.

The fact that Queensland is performing well in terms of spending should be welcome news for Gold Coast commercial property. After all, the area has plenty working in its favour at the moment, so investors now have an added incentive to see what it has to offer.

All eyes will be on the forthcoming federal election to see whether this does end up having an impact on confidence and, if so, to what extent. For the time being at least, Australians generally seem more optimistic and willing to spend, with positive knock-on effects for the wider economy.

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