The latest Westpac Melbourne Institute consumer sentiment survey shows a rise to 101.0 from July’s reading of 99.1. Any reading above 100 indicates the number of consumers who are optimistic is more than the number of consumers who are pessimistic. The rise was expected as the survey period included the covered the RBA’s 0.25% cut in the cash rate, an event which typically leads to more consumer optimism.
Westpac’s chief economist Bill Evans said the reaction to this latest cut in the official rate was more muted than May’s reaction. “Firstly, there was a larger surprise element to the May decision with, arguably, significantly less intense media speculation than we saw in August. Secondly the standard variable mortgage rate offered by most banks was reduced by the full 0.25%, whereas in August the four major banks only reduced variable rates by 0.10%-0.14%.”
Westpac is currently expecting the RBA to keep to just two rate cuts for the 2016 year although “it is clear from the Bank’s [quarterly] recent Statement on Monetary Policy that it holds an easing bias.” Australian 10 year bond futures finished the day at 98.12, implying a yield of 1.88% and down 7bps from the previous day’s 1.95%.
