Confidence up as RBA cuts loom

Michael Mehr
(Australian Associated Press)

 

Consumer confidence increased over the weekend amid talk of a cut to interest rates while inflation expectations fell, an ANZ analyst says.

The ANZ-Roy Morgan Australian Consumer Confidence index rose by 1.2 per cent from the previous week, although the “time to buy a household item” metric dropped 2.9 per cent.

“Consumers are upbeat about both their personal outlook and the economy in general,” ANZ economist David Plank said on Tuesday.

“The prospect of lower interest rates and what appears to be a major sentiment shift on the housing market are likely drivers of the positive outlook”.

The weekly measure of consumer confidence is based on about 1,000 face-to-face interviews conducted on Saturdays and Sundays.

Survey respondents indicated they were anticipating lower levels of inflation.

“This is the fifth sub-4.0 per cent reading since early March – an unprecedented run of low results for this survey,” Mr Plank said.

The Reserve Bank of Australia, which makes its next decision on interest rates on June 4, has indicated a combination of low inflation and a higher jobless rate will compel it to cut from an already record low of 1.5 per cent.

“Members discussed the scenario where inflation did not move any higher and unemployment trended up, recognising that in those circumstances a decrease in the cash rate would likely be appropriate,” the RBA minutes from May said.

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