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The Reserve Bank’s cutting cycle is finally starting to have a positive impact on consumer sentiment.
The Westpac-Melbourne Institute Index of Consumer Sentiment rose by 3.5 per cent, from 102.1 in July to 105.7 in August.
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Westpac chief economist Bill Evans said the result was the highest print for the index since March 2013.
“In that February/March period, the index had surged by nearly 10 per cent and we were encouraged that finally consumer confidence was on a sustained upswing. However, the index subsequently lost momentum. Indeed, if we exclude February/March, today's print is the highest since February 2011,” he said.
“However, it is still 7 per cent below the average print in 2010 when households had become quite optimistic that the potential fallout from the global financial crisis had passed. In fact, despite the Reserve Bank cutting rates by 2.25 per cent, so far in this cycle the index is only 2.3 per cent above its level following the first rate cut of 0.25 per cent back in November 2011.”
Mr Evans said a number of important forces were at work over the month to impact sentiment.
“Most important were the decision by the Reserve Bank to cut its overnight cash rate by 0.25 per cent and the full pass through of this cut to mortgage rates; the announcement of the September 7 election date; the government’s Economic Statement, which revealed a further deterioration in the fiscal position; and the consolidation of the Australian dollar at around 15 per cent below its recent peaks back in April.”
