A rate cut by the Reserve Bank of Australia in December failed to foster consumers' confidence as they remained wary of economic conditions, a survey by Westpac and the Melbourne Institute revealed Wednesday.
The Westpac-MI consumer confidence index fell 4.1 percent to 100 in December from 104.3 in November. This comes after a surprise 5.2 percent increase in November.
"This is a very surprising result," Westpac's Chief Economist Bill Evans said. Given the surprise rise in sentiment in November despite RBA decision to hold the interest rate unchanged, it seemed reasonable to expect that the Index would respond quite positively to the rate cut delivered last week, he pointed out.
"Despite another rate cut and improving sentiment towards housing, consumers remain cautious and particularly concerned around the outlook for the economy and for employment," the economist said.
According to Evans, households with a mortgage did respond positively to the rate cut with their confidence rising by 4.4 percent. However, other respondents were quite downbeat.
"Apparently, the fall in headline unemployment" to 5.2 percent from 5.4 percent, which was announced during the survey week, "had limited impact on respondents," Evans noted.
The sub-indexes tracking the one and five year outlooks for economic conditions were down 4.3 percent and 8.9 percent, respectively. In a disappointment for retailers, the sub-index tracking views on 'whether now is a good time to purchase a major household item' fell 4.8 percent.
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