Australia | Apr 18 2007
By Rudi Filapek-Vandyck
The Westpac-Melbourne Institute Index of Consumer Sentiment in Australia weakened by 0.2% in April from 115.5 in March to 115.3.
Westpac economists regard it a surprise the index did not increase this month with the Reserve Bank keeping interest rates steady despite intense media speculation they would decide otherwise. Also, the unemployment rate fell to a 32 year low of 4.5%; the Australian dollar rose to its highest level in 17 years and the share market boomed by 6% to reach a new record high.
So what’s happening with the Aussie consumer’s confidence?
Westpac sees the only obvious negative in the 4% rise in petrol prices since the last
sentiment survey. Has the Aussie consumers been unnerved by the prospect of higher interest rates, despite rates remaining on hold for the time being?
Westpac economists point out the confidence of those with a mortgage fell by 7% compared to an increase of 6.5% for those who own their own home. In addition, there was a fall of 3.7% in the index measuring whether now is a good time to buy a dwelling.
What this means, of course, is that if interest rates remain on hold, as expected by some economists, consumer confidence should bounce back, other things being equal.
The individual components of the index were mixed, the economists report. Interest rates expectations for family finances fell by 8.6%. Family finances compared to a year ago rose by 5.5%. Expected economic conditions over the next year rose by 3.1%, while expectations over the next five years fell by 1.5%. Whether now is a good time to buy a major household item rose by 1.6%.