Australia Consumer Confidence In a Positive Tone

Consumer Sentiment Index for Australia rose 2.0 percent to 101 in August of 2016, compared to a 3.0 percent drop in July. Expectations over economic conditions over the next 12 months increased by 3.5 percent, following a sharp decline in a month earlier. The outlook over the next 5 years dipped a slight 0.7 percent. The measure of whether this was a good time to buy major household items was up by 1.6 percent.

Bill Evans, chief economist at Westpac, wasn’t surprised by the modest increase, noting that while sentiment tends to lift following a rate cut, the fact it was largely expected, and not passed on in full to the vast majority of mortgage holders, likely contributed to a muted gain.

“(In May) the index lifted by an impressive 8.5% from 95.1 to 103.2. That was an exceptionally large positive response and much stronger than the average rise following rate cuts historically. That can be explained by a number of factors,” he said.

“Firstly, there was a larger surprise element to the May decision with, arguably, significantly less intense media speculation than we saw in August. Secondly, the standard variable mortgage rate offered by most banks was reduced by the full 0.25%, whereas in August the four major banks only reduced variable rates by 0.10-0.14%.

“Finally, the index was coming from a significantly lower starting point in May (95.1) than in August (99.1),” he added.

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