Consumer sentiment hits two-year high

Australian consumer sentiment has hit its highest level in more than two years but is yet to provide a boost to the economy.

The Westpac/Melbourne Institute index of consumer sentiment rose two per cent to 110.5 points in March, its highest level since the end of 2010.

A reading above 100 indicates optimists outnumber pessimists among respondents, with the index having been in positive territory for the past five months.

Westpac chief economist Bill Evans said consumer sentiment had risen 15.1 per cent over the past year and was at its highest level since December 2010.

He said consumers were finally reacting to the 1.75 percentage points of interest rate cuts delivered between November 2011 and December 2012.

"The rate cuts had been having limited impact on consumer confidence," he said.

"However, in recent months we have seen the accumulation of the cuts appearing to be genuinely boosting confidence."

The Reserve Bank of Australia kept the cash rate on hold at three per cent in February and March, equal to its post global financial crisis low.

Mr Evans said gains on local and international stock markets since the start of 2013 had also helped lift consumer confidence.

JP Morgan economist Ben Jarman said the improvement in confidence had not yet provided the much hoped-for boost to the economy.

He said consumers still appeared reluctant to take on more debt and remained conservative in their spending habits.

"Without the follow-through to credit and spending trends, the rally in confidence has been insufficient to engineer much upside to the growth outlook," he said.

Mr Jarman said the weak jobs market was one reason for consumers' reluctance to open their wallets again.

Economists expect Australia's unemployment rate to have risen to 5.5 per cent in February, and Mr Jarman said households were saving the money delivered through recent rate cuts to protect themselves in case they lost their job.

"Households still are nervous about losing their job but feel that they are facing this risk with a greatly improved liquidity position," he said.

The Westpac index showed respondents' assessments of their own finances had improved in the past month.

The sub-indice tracking views on family finances compared to a year ago increased by 3.9 per cent while the sub-indice tracking assessments of family finances over the next 12 months rose by 3.1 per cent.

Market Data

  • Currencies
    Currencies
    NamePriceChange% Chg
    0.9327-0.0005-0.05%
    AUDUSD=X
    0.5555-0.0003-0.05%
    AUDGBP=X
    0.6753-0.0003-0.05%
    AUDEUR=X
  • Commodities
    Commodities
    NamePriceChange% Chg