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Surprising twist in investor confidence recorded after RBA cut

By Cameron Micallef · June 13 2019
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Westpac
Surprising twist in investor confidence recorded after RBA cut

Surprising twist in investor confidence recorded after RBA cut

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By Cameron Micallef · June 13 2019
Reading:
egg
egg
Westpac

The Reserve Bank of Australia’s decision to cut rates may not have its desired impact of kick-starting the economy, if these latest figures from Westpac are anything to go by. 

New research released by major bank Westpac shows that consumer sentiment has dipped by 0.6 per cent to 100.7, with 100 index points representing the break-even point between optimistic and pessimistic about the economy.

According to Westpac senior economist Matthew Hassan, overall consumer confidence was pessimistic following the Reserve Bank of Australia’s June 4 decision.

“Those collected after had a combined read of 95.5, with daily results showing a further softening after the weak GDP report,” said Mr Hassan.

Unemployment fears rise

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Consumer confidence in the labour market has continued to falter in the month of June.

“The Westpac-Melbourne Institute Unemployment Expectations Index recorded a 5.1 per cent rise, reversing all of the previous month’s decline,” said Mr Hassan.

“NSW and Vic showed particularly sharp rises in June, both up 7.9 per cent. That said, the index levels in these states and nationally are still slightly better than average,” continued Mr Hassan.

What about property?

The rate cut had a positive impact, potentially where it was desired most, with housing-related sentiment clearly responding positively to a rate reduction.

“Where policy changes have generated by far the biggest shift is around expectations for house prices. The Westpac Melbourne Institute Index of House Price Expectations posted a spectacular 22.7 per cent gain in June, moving from deep negative territory of 89.4 to a clear positive read of 109.7,” said Mr Hassan.

Impact of the election

The surprise federal election result, according to Westpac, has had a mixed effect on consumer confidence.

Unsurprisingly, if an investor was a Coalition voter, they saw the election result as a positive and with that consumer confidence rose by 7.5 per cent amongst Mr Morrison’s base.

On the flipside of this, Australian Labor Party voters’ confidence in the government’s return to power fell sharply, with overall consumer confidence from the ALP falling by 9.9 per cent.

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