Australian Consumer Confidence Rises In Response To Rate Cut

Post by Sharat on December 15, 2011 · Under Business News, banking · Comment 
RBA

In November the Westpac-Melbourne Institute Consumer Sentiment index surged for the first time since the beginning of 2009, after the central bank cut its benchmark interest rate in response to a declining threat of inflation, and fears of uncertainty in Europe.

The index of consumer confidence rose by 6.3 per cent in November after the Reserve Bank of Australia slashed borrowing costs to 4.5 per cent from 4.75 per cent at the start of the month.

The index rose to 103.4 points during November, up from 97.2 points October, the Institute said in a statement.

“This result is around our expectations and is clearly driven by the decision by the Reserve Bank to cut the official cash rate,” said Westpac chief economist Bill Evans.

In justifying its decision the Reserve Bank cited easing inflation pressure, an increased threat of higher unemployment and the potential for the sovereign debt crisis in Europe threatening to spill over into the rest of the world.

In November the RBA also revised down its economic growth and inflation forecasts out until the end of 2013.

Unsurprisingly, Mortgage were the most optimistic, posting a 13.9 per cent gain in confidence as all major lender quickly reacted to the interest rate decision, by passing on the rate cut to their borrowers. Mortgage free home owners posted a 6 per cent increase in confidence, whilst the confidence of tenants fell by 6.8 per cent.

The index’s level is the highest it has been since May, suggesting that pessimists are slight outnumbered by their optimistic counterparts for the first time since June

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