Consumer confidence has surged to a 19-month high as the Reserve Bank's 1.5 percentage points of interest-rate reductions boost household optimism, a private survey shows.
The sentiment index for November gained 5.2 per cent to 104.3, a Westpac and Melbourne Institute survey taken November 5-11 of 1200 adults showed today. 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. ‘‘Households are becoming more comfortable with the global outlook.’’
The central bank kept the benchmark rate unchanged at 3.25 per cent 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 November 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,’’ Mr Evans said. The survey ‘‘is still clearly signalling a boost to confidence around the housing market,’’ he said.
Traders are pricing in a 65 per cent chance policy makers will lower borrowing costs by a quarter-percentage point to 3 per cent 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,’’ Mr Evans said, predicting another reduction next month.