Housing finance strong. Consumer sentiment rising. Those two indicators, out this morning, suggest the Australian consumer seems determined to avoid thinking about recession.

While an expected rise in unemployment in June is tipped in tomorrow’s ABS labour force figures, that news will be hard pressed to offset the surge in consumer confidence to its highest level since December 2007. And housing finance approvals continue to rise, especially for owner-occupied housing, thanks to the first home buyer’s grants with the amount lent and the proportion of all buyers hitting new record highs in May.

Consumer confidence had plunged in 2008 as the markets worsened; the fall was exacerbated by the rise in petrol prices, the slowing in demand in retailing as a result and the surge in gloom and doom stories. House prices came under pressure in some markets and the resources boom bubble was popped and jobs started being lost, especially in WA and Queensland.

The Bear Stearns problems in March and then the crunch in September when Lehman Brothers failed and more banks, brokers and other companies were bailed out, trembled or raced for the safety of government help, saw another fall in confidence.

But those days are well and truly behind us — for the time being at least. Consumer confidence has risen to its highest level in 19 months on the belief that economy has averted a recession. The Westpac/Melbourne Institute survey showed a 9.3% rise in July from June to 109.4 points, the highest since December 2007.

“This is unquestionably a stunning result”, says Westpac’s Chief economist, Bill Evans, concluding that the main driver of sentiment “must be the huge financial handouts introduced by the government to counter the global financial crisis.”

Meanwhile, the influence of first home buyer builders continues to dominate housing finance. First home buyers hit a record proportion of nearly 30% of all home purchases in May, and the seasonally adjusted number of new owner occupied homes finance surged 8% in May to 6,334, the highest level since January 2002.

The amount of money lent for home building shows the influence of first home buyers: the $1.550 billion lent in may was a record, up 6.9% from April and more than 55% on November’s $998 million. No wonder the Reserve Bank and the Government are confident that home building will help support the economy later this year and into 2010.