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Consumers in Indonesia are in a buoyant mood. The economy is strong, new jobs are being created and overall living standards in the country are on the rise. It is thus no surprise that Indonesia ranked second in a global consumer confidence index prepared by AC Nielsen.

In the first quarter of 2010, 70 percent of Indonesian consumers described their job prospects as either excellent or good, compared to an average of 57 percent in the Asia-Pacific region.

Nearly half of those surveyed also said now is a good time to go shopping, a sentiment which will have retailers smiling if it translates into increased spending.

Given the ongoing problems in Europe and the United States, the latest consumer spending survey provides a golden opportunity for the government to lay the groundwork for sustainable growth in the foreseeable future.

This can be achieved through sound economic and social policies and by empowering the private sector.

Encouraging consumers to spend is good for the economy and for business.

With consumer spending contributing between 60 percent to 65 percent of the nation’s gross domestic product, higher spending translates directly into higher economic growth.

As consumers spend more, businesses will invest more in plants and equipment to meet demand, in the process creating more jobs, which expands the consumer base.

To ensure that consumers continue to spend within their means, the government must introduce policies that balance economic realities with protecting the fabric of society.

While we encourage greater spending, we must be careful not to repeat the mistakes of Western countries that went on a decades-long spending spree even as incomes failed to grow.

Asians have always been known to be good savers. But if we can introduce sound policies and a resilient social safety net, consumers can spend more with greater security.

It is telling, for example, that many Indonesians are still concerned about meeting health care and education costs and thus save a substantial portion of their income in order to cover unexpected expenses.

A social safety net will lessen the need to save more than is necessary. It will also enable millions more Indonesians to emerge from poverty and secure a better future for themselves and their children.

The second major factor preventing consumers from spending more is high interest rates.

Banks and financial institutions in the country still charge interest rates that are among the highest in the region, even though they are historically low for Indonesia.

There is therefore room to cut rates further.

By providing greater access to borrowing, banks can play a crucial role in sustaining the strong consumer spending trend that has emerged in recent years. The consumer sector is now a key pillar of the economy and as such, it must be managed well.