After a lengthy divergence between consumer sentiment and business confidence in Australia which began in 2014, the two sectors converged again around July 2018. Currently, both measures are around neutral or slightly negative levels. The latest reading of consumer sentiment may have moved to a slightly optimistic level but it is still only at the long-term average.
According to the latest Westpac-Melbourne Institute survey conducted in early May, average household optimism has continued to remain close to neutral levels. The Consumer Sentiment Index moved a little higher, this time from April’s reading of 100.7 to 101.3. 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.
Westpac chief economist Bill Evans said, “Despite the Reserve Bank ultimately deciding not to cut the cash rate at its May Board meeting, it is likely that households are much more confident this month than previously that interest rates are likely to come down further.”