Despite RBA interest rate cut, Australia’s consumer confidence dips 2.8% to 114.7, lowest level since June

The slight recovery of Australia’s consumer confidence in June by 0.5 percent to 115.5 was lost again. The measure declined to its lowest level in nine weeks by 2.8 percent to 114.7.

Business Insider Australia notes the unexpected fall of the index despite the Reserve Bank of Australia (RBA) cutting interest rates to a record-low level of 1.5 percent. Normally, reduction in the key lending rate results in improvement in overall sentiment levels.

But the weekly ANZ-Roy Morgan consumer confidence index is still higher than its long-run average of 112.8. Explaining the results, ANZ says consumers were more pessimistic on near-term economic outlook. This is evident in household view of 12-month economic outlook going down sharply by 8.6 percent. Medium-term 5-year outlook also went down but by only 1 percent.

The disappointing consumer confidence index erases the gains of the past two weeks, says Felicity Emmet, head of Australian economics at ANZ. She points out the weakness in confidence is more pronounced in the near-term economic outlook, likely also over concerns in the global economy’s health.

But Emmet adds the survey’s measure on finances are still relatively healthy which would imply firm household consumption levels in the coming months. The finance index, she says, has the closest relationship with consumer spending. Current levels suggest that household spending would continue to grow at a relatively solid pace.

Meanwhile, ANZ – which posted a cash profit of $5.2 billion in the nine months to June 30 – is confident returns would improve despite a continued slow-growth environment. The bank likewise plans to cut its exposure to under-pressure sectors, says CEO Shayne Elliott, reports Bluenotes.

Elliott says ANZ continues to grow and would lend more to segments and customers it feels positive.