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ISCOVER
Staff Reporter
The Reserve Bank’s decision to trim the official cash rate several times last year may finally be starting to pay off, with the Westpac-Melbourne Institute Index of Consumer Sentiment rising by 2 per cent in February.
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The index climbed to 110.5 from 108.3 in February, following a 7.7 per cent rise the month before.
Westpac's chief economist, Bill Evans, said the result was “strong” and marks the fifth consecutive month that the index has registered above 100.
“This is the highest level of the index since December 2010 and it is up by 15.1 per cent over the last year,” he said.
“Despite the Reserve Bank reducing its cash rate by 175 basis points between November 2011 and December 2012, the index averaged a modest 98 over the course of 2012. The rate cuts had been having limited impact on consumer confidence. However, in recent months we have seen the accumulation of the cuts appearing to be genuinely boosting confidence.”
Since October last year, the index has increased by 11.5 per cent.
“Equity markets and the associated signals that global economic prospects are improving are the other key driver of this improved confidence,” Mr Evans said.
“Consumers would have been buoyed by the positive run on markets. The sharemarket continued its strong start to the year, rising a further 3 per cent between the February and March surveys to be up 10 per cent for the year and 20 per cent from its September low. Gains have been impressive offshore as well, with the Dow Jones up 10 per cent so far in 2013, reaching a new record high.”
