Bloomberg News

Australia Consumer Confidence Reaches 19-Month High on Rate Cuts

November 13, 2012

Australian consumer confidence surged to a 19-month high as the central bank’s 1.5 percentage points of interest-rate reductions boosted household optimism, a private survey showed.

The sentiment index for November gained 5.2 percent to 104.3, a Westpac Banking Corp. (WBC) and Melbourne Institute survey taken Nov. 5-11 of 1,200 adults showed today in Sydney. The index rose above 100, which indicates optimists outnumber pessimists, for the first time since February, ending an eighth- month skid below that level that was the longest stretch since the global financial crisis.

“Finally we are seeing some traction on confidence from the rate cuts over the last year,” Bill Evans, Westpac’s chief economist, said in a statement. “Households are becoming more comfortable with the global outlook.”

The central bank kept the benchmark rate unchanged at 3.25 percent this month as the global economy stabilizes and domestic inflation accelerates, after five cuts from November last year to October this year. The survey took in the impact of the Nov. 6 decision to pause rate reductions and reinforced indications in October of an improved outlook for property.

“It appears that the ‘disappointment’ effect of the bank’s decision has been quite muted,” Evans said. The survey “is still clearly signaling a boost to confidence around the housing market,” he said.

Traders are pricing in a 65 percent chance policy makers will lower borrowing costs by a quarter-percentage point to 3 percent at their meeting next month, swaps data compiled by Bloomberg show.

“The Australian economy is facing uncertainty around the mining sector and with contractionary fiscal policy and a punishingly high Australian dollar, we need further rate cuts to help build on these early signs that lower rates are having an impact on households’ confidence,” Evans said, predicting another reduction next month.

To contact the reporter on this story: Michael Heath in Sydney at mheath1@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net


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