Consumer Sentiment Is At A 5-Month High, Thanks To The Rate Cut

The RBA’s cash rate cut this month boosted consumer sentiment to a five-month high, with families more optimistic about their finances and the economy.

The Westpac Melbourne Institute Index of Consumer Sentiment rose 3.5% in August to 105.7 – the highest reading since March, and a 9.4% year-on-year improvement.

The index is based on telephone survey interviews over one week. This month’s surveys were conducted in the week directly after the government downgraded its economic forecasts.

Results rose only 0.3% in the first two days of the survey – prior to the RBA’s rate cut decision.

Interviewees were significantly more optimistic in the final five days of the survey, after the RBA cut rates by 25 basis points and a majority of banks had announced that they would pass on the cuts.

Among people with mortgages, consumer sentiment rose 7.4%. However, people were less interested in making large household purchases because of a low AUD.

Westpac chief economist Bill Evans said the August result was markedly different to what happened in May, when the index fell by 7.0% despite a 25 basis point rate cut, as the positive sentiment was offset by a worrying Federal Budget.

Now read: Australian Business Confidence Is Down To An Eight-Month Low

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