Australian consumer confidence fell the most in three months after the nation’s four biggest lenders raised mortgage rates even as the central bank left the benchmark borrowing cost unchanged, a private survey showed.
The sentiment index for March dropped 5 percent to 96.1, the lowest level since December, Westpac Banking Corp. (WBC) and Melbourne Institute survey taken March 5-9 of 1,200 consumers showed today in Sydney.
“Sensitivity to interest rates has clearly been one factor responsible for this weak print,” Bill Evans, Westpac’s chief economist, said in a statement. In addition, “our supplementary questions indicate that respondents are particularly concerned about economic conditions and employment,” he said.
Reserve Bank of Australia Governor Glenn Stevens lowered the overnight cash rate target by a quarter percentage point on Nov. 1 and Dec. 6, before keeping the rate unchanged for the past two meetings at 4.25 percent. House prices slumped by a record last year and unemployment in Australia rose in February to 5.2 percent.
“With the two previous rate cuts in November and December being passed on in full by the banks, it is reasonable to assume that many borrowers expected a further cut in the mortgage rate,” Evans said, referring to Stevens’s unexpected pause in February. “Instead, mortgage rates were actually increased in the following week with banks raising mortgage rates by an average of 0.10 percent. It is likely that this reversal has impacted confidence.”
Commonwealth Bank of Australia increased the interest on a variable-rate home loan by 10 basis points to 7.41 percent, followed by National Australia Bank Ltd. (NAB), which added 9 basis points to 7.31 percent. Westpac boosted the cost by 10 basis points to 7.46 percent on Feb. 10, after Australia & New Zealand Banking Group Ltd. (ANZ) added 6 basis points to 7.36 percent.
Companies outside Australia’s booming mining industry are struggling, and the so-called two-speed nature of the nation’s economy was reflected in the loss of 15,400 jobs in February and the first increase in the jobless rate since August.
The local dollar has risen about 3 percent this year and reached a six-month high of $1.0845 last month after the RBA unexpectedly paused at its Feb. 7 meeting. The currency bought $1.0548 at 10:15 a.m. in Sydney today.
Driving Australia’s economy is a A$456 billion ($480 billion) pipeline of investment in resource projects by companies such as BHP Billiton Ltd.. (BHP)
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