Australia consumer confidence jumps to 26-mth high

SYDNEY Tue Feb 12, 2013 6:30pm EST

SYDNEY Feb 13 (Reuters) - A measure of Australian consumer confidence surged to its highest in 26 months in February as people become more optimistic about the economy and their own finances, suggesting past interest rates cuts might finally be lifting spirits.

The poll of 1,200 people by the Melbourne Institute and Westpac Bank showed its index of consumer sentiment climbed 7.7 percent in February, from January when it edged up 0.6 percent. The index of 108.3 meant there were more optimists than pessimists in the poll.

The monthly increase was the sharpest since September 2011 and left the index up 7.2 percent on February last year.

"The report is welcome news with the solid gain in confidence the most promising sign yet that lower interest rates are starting to generate more positive traction with consumers," said Westpac chief economist Bill Evans.

The Reserve Bank of Australia (RBA) cut interest rates in both October and December, taking them to record-matching lows of 3 percent. It skipped a chance to ease at its February meeting but left the door wide open for a further move if the economy needed it.

"Sentiment may have been buoyed by a strong start to the year for financial markets," said Evans. "News from offshore has also been broadly supportive."

"That said, confidence is still well below the levels recorded during the last easing cycle in 2008-09 which saw sustained readings of around 120," he added.

Details of the survey showed a marked improvement in attitudes to the economy. The index of expectations for the economy in the next 12 months surged 14.7 percent, while that for the next five years increased by 10.8 percent.

People were also feeling more confident about their finances. The index of family finances compared with a year ago rose 7.3 percent, while that for finances over the next 12 months increased by a more modest 1.5 percent.

In a positive sign for retailers, the survey's measure of whether it was a good time to buy a major household item rose 5.5 percent.

Evans, however, noted retail sales and home loan data remained disappointing and argued there was still a case for lower interest rates. He expects a further cut to a record low of 2.75 percent at the RBA's March meeting. (Reporting by Wayne Cole)

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