During most of the period between 2014 and 2018, a divergence between consumer sentiment and business confidence in Australia was evident. Normally, the two sectors could be expected to generally track the same path, so an extended difference between the two was somewhat unusual. Around July 2018, the two sectors converged again and, since then, they have generally been moving in line with each other.
According to the latest Westpac-Melbourne Institute survey conducted in the first week of February, average household optimism increased as the Consumer Sentiment Index recovered from January’s reading of 99.6 to 103.8. Any reading above 100 indicates the number of consumers who are optimistic is greater than the number of consumers who are pessimistic. The long-term average reading is just over 101.
Local bond yields reacted by moving higher, although how much of the change was due to the report and how much was due to higher US bond yields is debatable. By the end of the day, the yield on 3-year Treasury bonds was 3bps higher at 1.68% while 10-year and 20-year yields each increased by 4bps to 2.15% and 2.53% respectively.