Australia: Sentiment dips as economy concerns outweigh policy boost - Westpac

Matthew Hassan, analyst at Westpac, point out that the Australia’s Westpac-Melbourne Institute Index of Consumer Sentiment dipped 0.6% to 100.7 in June from 101.3 in May.

Key Quotes

“This is a disappointing result given the cut in official interest rates this month and suggests deepening concerns about the economy have outweighed the initial boost from lower rates. Indeed, the Reserve Bank’s move was widely anticipated and may well have ‘franked’ these concerns which would have solidified further following the disappointing national accounts figures released a day later.”

“The March quarter GDP update showed growth slowing to just 1.8% at the start of the year, the slowest pace since the GFC in 2009 and a full percentage well below ‘trend’ of 2.75%.”

“Moves in the component indexes support this interpretation. The biggest decline was in the sub-index tracking expectations for the ‘economy, next 12mths’ which dropped 4.7% to be back in slightly pessimistic territory.”

“The labour market will remain a key focus for the policy profile. Westpac’s more downbeat view on this front points to a further 25bp cut in November taking the cash rate to 0.75%.”