The promise of more cash led consumers out of hiding - but businesses are still struggling
The promise of more cash led consumers out of hiding - but businesses are still struggling Contributed

Consumer mood rebounds after rate cuts

CONSUMER confidence rebounded from a two-year low in August as people became more upbeat on the economy and the housing market, according to one measure, offering a scrap of hope for the hard-pressed retail sector.

Wednesday's survey showed the Melbourne Institute and Westpac Bank index of consumer sentiment rose 3.6 per cent in August, reversing a surprise 4.1 per cent drop in July.

The index was down 3.5 per cent from a year earlier, and at 100.00 indicated there were now as many optimists as pessimists.

The survey of 1,200 people will be a relief for the Reserve Bank of Australia, which cut interest rates in both June and July in part to support consumer demand.

"Indeed, part of the gain is consistent with firming expectations for additional interest rate cuts," said Westpac chief economist Bill Evans.

"The media and economic forecasters now expect a further lowering in the official cash rate in coming months."

The survey's index of economic conditions for the next 12 months jumped 9.6 per cent, while expectations for the next five years rose 4.5 per cent.

Respondents were less upbeat on their own circumstances. A measure of the state of family finances compared with a year ago edged up 0.9 per cent, while the outlook for the next 12 months rose 0.7 per cent.

In a promising sign for retail sales, a measure of whether it was a good time to buy a major household item climbed 2.8 per cent, the highest in over a year.

The "time to buy a dwelling" index also firmed 3.0 per cent to its highest since early 2014, with Sydney and Melbourne leading the recovery after two years of weakness.

House prices in the two cities have stabilised in the last couple of months with demand at auctions improving markedly.

The survey's index of expectations for house prices gained 5.1 per cent in August, to be up 40 per cent since May.


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