Australia: Consumer sentiment back in positive territory - Westpac

Bill Evans, Chief Economist at Westpac, notes that the Westpac Melbourne Institute Index of Consumer Sentiment increased by 2.0% in August from 99.1 in July to 101.0 in August.

Key Quotes

“The survey was conducted over the first four days of August, covering the Reserve Bank’s August 2 announcement of a 0.25% cut in the overnight cash rate from 1.75% to 1.5%. The response to this development has been much more muted than we saw in May when the Bank last cut the rate, from 2.0% to 1.75%.

Another development that may have unnerved respondents in August has been political unease. With the government having been returned with a wafer thin one seat majority in the House of Representatives and considerable change in the Senate, respondents might also be somewhat uncertain about future prospects around potential political stability.

Finally we have to accept that as interest rates go progressively lower some respondents, particularly those who may not have a mortgage, may become more unnerved about the signal that record low rates is sending about the economy.

Overall the lift in the Index is still consistent with an improved outlook for the Australian economy. We are now back in the range where optimists outnumber pessimists. Over the last thirty months there have only been eight when optimists have been in the ascendency with three of those months figuring in the last four.”