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SYDNEY, Oct 10 (Reuters) - A measure of Australian consumer confidence rose for a second month in October as a cut in interest rates left households feeling more secure in their finances and about buying a new home, though many remained cautious on the longer-term economic outlook.
The poll of 1,200 people by the Melbourne Institute and Westpac Bank showed its index of consumer sentiment rose 1.0 percent in October to 99.2, after a 1.6 percent increase the previous month. The index was up 2 percent on October last year and shows optimists now almost equal pessimists.
The survey was conducted in a week when the Reserve Bank of Australia (RBA) cut interest rates a quarter point to a three-year low of 3.25 percent, and left the door open to further easing.
The prospect of lower mortgage costs showed in the index of family finances compared to a year ago which jumped 5.3 percent in October. Respondents were also more optimistic about the outlook for their finances over the next 12 months.
In a promising sign for retailers, the survey's measure of whether it was a good time to buy a major household item climbed 3.7 percent. The index of whether it was a good time to buy a home also surged 9.6 percent to be up 17.9 percent in two months and the highest since September 2009.
"The most encouraging result from today's survey came from the index tracking views on dwellings," said Westpac chief economist Bill Evans.
"This message is consistent with other recent evidence of firming auction clearance rates. The response of the housing market to the recent rate cuts will be very important to watch."
The RBA has singled out the depressed home-building sector as one area that it would like to see strengthen.
Still, the survey showed people continued to fret about the future with measures of expectations well below those covering current conditions.
The index of expectations for the economy in the next 12 months dipped 2.4 percent while that for the next five years fell 4.6 percent.
Evans characterised this as a disappointing result which argued for further cuts in interest rates.
"The Reserve Bank Board next meets on November 6. We expect that the Board will decide to cut the overnight cash rate by a further 25 basis points," he said.
Evans expects rates to bottom at a record low of 2.75 percent early in the new year. (Reporting by Wayne Cole; Editing by Eric Meijer)