Australia’s consumer confidence surged and business sentiment showed ongoing resilience after the Reserve Bank of Australia (RBA) left its key interest rate unchanged for the first time in its almost yearlong tightening cycle.
Consumer sentiment rose 9.4 percent this month to 85.8, a Westpac Banking Corp survey showed yesterday.
Still Westpac chief economist Bill Evans said he expects household spending this year to be lackluster with confidence remaining 10.4 percent below the level in April last year, the month before the RBA began raising rates.
Photo: Reuters
A separate National Australia Bank Ltd survey released an hour later yesterday showed that business conditions eased to 16 points last month, remaining well above long-run average.
Confidence advanced three points to minus-1.
“The survey suggests the economy is still holding up and indicates there has been some easing in inflation,” National Australia Bank chief economist Alan Oster said. “There is still a long way to go to bring inflation back down to the RBA’s target band and growth could be more volatile from there.”
RBA policymakers paused their tightening cycle last week as they attempt to engineer a soft landing in the economy while bringing down inflation.
The central bank has raised rates 3.5 percentage points since May last year to 3.6 percent and this month signaled the hurdle to further tightening is elevated.
The RBA’s inflation target is 2 to 3 percent and the most recent monthly reading came in at 6.8 percent.
RBA Governor Philip Lowe has said the board would closely monitor data on inflation, jobs, consumer spending and business surveys before making a decision on further increases.
“With underlying inflation still likely to be in the 6.5 to 7.0 percent range and the unemployment rate holding around fifty-year lows the case for extending the pause in May is likely to be challenged,” Evans said.
“The board’s decision will be to weigh the ‘here and now’ evidence against its two-year forecast,” he added.
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