Westpac Consumer Confidence Index Declines

Post by NeilMc on November 11, 2009 · Under Australian Economy, Business News · Comment 

The Westpac Melbourne Institute Index of Consumer Sentiment, a closely followed consumer confidence indicator has fallen after the second consecutive interest rate hike.

The Index declined by 2.5 per cent and fell to 118.3 in November, down from 121.4 in October, after having gained 1.7 per cent in that month.

Bill Evans, chief economist for Westpac, said consumer sentiment still remained positive despite the decline in the index.

“Given that this fall comes after a second consecutive increase in the Reserve Bank’s overnight cash rate and associated increases in variable mortgage rates it has to be classified as a modest response. The level of the Index is still 38.3 per cent above its level from a year ago.” Mr. Evans said in a statement on Wednesday.

Mr. Evans said that the previous three month average index reading of 119.7 had only ever been exceeded four times during periods of high optimism, since the survey began in 1975.

Since the Australian central bank began tightening interest rates in October, the index has declined by 0.8 per cent Mr. Evans said.

The Reserve Bank of Australia lifted interest rates by 25 basis points in October and November, increasing interest rates from half century lows to the current 3.5 per cent.

“This is broadly comparable to the 0.7 per cent fall we saw in response to the beginning of the last rate hike cycle when the Bank raised rates by 0.25 per cent in both May and June 2002. It seems reasonable that the level of rates is the dominant factor in determining households’ responses to rate hikes.” Mr. Evans said.

The survey of 1,200 people aged over 18 was conducted between November 2 and 18, the same week the RBA lifted interest rates.

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