Consumer sentiment falls as RBA holds rates

James Glynn
Dow Jones Newswires
April 11, 2012

AUSTRALIAN consumers are as gloomy now as they were in mid-2011, when fears of a sovereign default in Europe were escalating and threatening to unleash a fresh period of international turmoil.

The Westpac-Melbourne index of consumer sentiment in Australia fell 1.6 per cent in April from March to 94.5 from 96.1, its lowest level since August just ahead of twin interest rate cuts.

Westpac chief economist Bill Evans said the result was a mild surprise because it has fallen to levels not seen since August 2011, when consumers were very concerned about the global outlook.

Mr Evans said that, in normal circumstances, consumer sentiment would have lifted on the back of recent signs of improvement in the world economy and comments by the Reserve Bank of Australia pointing to the potential for a cut in interest rates in May.

“Apart from last year’s lows and the March 2008 to May 2009 period, when households feared a recession associated with the global financial crisis, we have to go all the way back to 2001…to find sustained lower reads,” he said.

The RBA’s failure to deliver an interest rate cut in April is the likely reason for the loss of confidence, he said.

The list of worries for consumers is long, he said. They include concerns around job security, house prices, high debt levels, petrol prices, utility costs and uncertainty around the imminent introduction of a price on carbon, Mr Evans said.

Confidence of borrowers fell 5.1 per cent in April, the survey showed. Over the last 12 months, the average standard variable mortgage rate in Australia has fallen by 0.4 per cent, yet the confidence of respondents who hold a mortgage has fallen by 14.6 per cent.