Australian consumers weigh budget easing against rate risks By Reuters
SYDNEY (Reuters) – Australian consumer sentiment rose slightly in June as the promise of an imminent tax cut eased the mood, a survey showed on Tuesday, although the risk of higher borrowing costs loomed in the background.
The Westpac-Melbourne Institute’s index of consumer sentiment rose 1.7% in June from May, when it fell 0.3%. The index reading of 83.6 showed that optimists continued to outpace pessimists, as they have for months now.
News of cost-of-living assistance from state governments is likely to help sentiment ahead of big income tax cuts from July 1.
However, this study also included a meeting of the Reserve Bank of Australia (RBA) which warned that there are risks of rising inflation and another increase in interest rates could not be ruled out.
The survey found a sharp drop in sentiment to 80.1 after the RBA decision, from 90.0 before the announcement. The proportion of respondents expecting higher mortgage rates in the next 12 months also rose to 48.3%, up from 43.5% in May.
“The survey data suggests that the positives from monetary policy have been overshadowed by growing concerns about inflation and the outlook for interest rates,” Westpac chief economist Matthew Hassan said.
The release of the budget saw a drop in the household finances survey ratings, although the economic situation remains very pessimistic.
An index measuring whether it was a good time to buy major household items strengthened 4.2%, but at 79.7 it remains well below its long-term average of 124.
