Bill Evans, analyst at Westpac, notes that Australia’s Westpac-Melbourne Institute Index of Consumer Sentiment rose 4.5% to 97.0 in November from 92.8 in October.
Key Quotes
“This rise in the Index follows a sharp 5.5% fall in October. The pattern of confidence falling in response to a rate cut and recovering when the RBA remains on hold repeats what we saw earlier in the year when the Index fell by 4.1% following the July cash rate cut only to recover 3.6% in August, when the RBA left rates unchanged.”
“This result continues to support the general view that consumers are somewhat unnerved by the announcement of low rates and media controversy around the banks’ responses.”
“Note that looking through month to month volatility the Index has fallen by around 4% since the RBA started cutting the cash rate in June and has been below the 100 level, indicating pessimists outnumber optimists, for four of the last five months.”
“The Reserve Bank Board next meets on December 3. Westpac expects that the Bank will hold rates steady at that meeting. Recent publications from the Bank indicate that it is prepared to take more time to assess the impact of the three cuts we have already seen. However, the Board retains a clear easing bias and we expect it to act on this bias next February with a further 25bp rate cut.”
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