China risks dampening confidence recovery

It could be months before the impact of China's volatile share market is felt on its economy and the global economy more broadly.

In the meantime, wild swings in Chinese share prices risk undermining improving levels of consumer confidence in Australia.

The Australian sharemarket closed slightly lower on Tuesday after the Chinese market failed to maintain a recovery from an eight per cent slump on Monday, its biggest one-day fall in over eight years.

At the start of this month, the Chinese market had accumulated 30 per cent of losses in a matter of weeks, after a staggering 120 per cent rally over the previous eight months.

ANZ chief economist Warren Hogan expects such volatility would cause the Chinese economy to slow a little.

"The big question for the rest of the world, including Australia, is is it going to slow down enough to have a negative impact here and we really won't get a good gauge of that for a number of months," he told ABC television.

Australian consumers are just getting over their last bout of jitters over the financial woes of the country's number one trading partner and the fallout from the Greek debt crisis.

The ANZ-Roy Morgan consumer confidence gauge rose 0.6 per cent in the past week, building on the 4.5 per cent recovery of the previous week.

It had slumped eight per cent at the start of the month.

Other data showed that despite the unsettled nature of consumer confidence, it hasn't put people off applying for loans or new credit cards.

This suggests that in a low interest rate environment, Australia's retail and housing sectors will continue to benefit and help offset the impact of the downturn in mining-related construction, credit data provider Veda says.

Its quarterly consumer credit demand index jumped 10.7 per cent in the June quarter compared with the same period last year.

The index, which provides an early indication of movements in consumer spending and retail sales, included a 15 per cent surge in credit card applications and a 6.4 per cent increase in personal loans.

Another forward indicator of retail spending, the Australian Food and Grocery Council-CHEP retail index, was 4.3 per cent higher in the June quarter compared to a year earlier.

Based on pallet movements of logistics company CHEP Australia, the index is pointing to 4.6 per cent growth in the September quarter.