Surprising group feeling good about rate cut

Perth Now

14 hours ago

A surprising group of Australians are feeling better about their personal finances and the broader economy after the Reserve Bank's August rate cut gave households a much-needed confidence boost.
The latest Westpac-Melbourne Institute survey showed consumer sentiment jumped 5.7 per cent to 98.5 in August.
This was its highest level in nearly four years.
A score of 100 or better suggests Australians are optimistic about the future.
But the soaring consumer sentiment is not coming from the group of people you would expect to benefit from lower rates. Australians are feeling better on the back of interest rate cuts. NewsWire/ Monique Harmer Credit: News Corp Australia
Westpac head of Australian macro-forecasting Matthew Hassan said overall consumers were feeling better about cost of living.
'Interestingly, the gains are not confined to or even being led by the mortgage belt, the
section of consumers that stand to benefit most directly from lower interest rates,' he said.
'Some of the strongest improvements in the August month were among renters, suggesting that easing cost-of-living pressures – including slower growth in rents – has also been a positive.'
Mr Hassan said the sharp pick up in consumer sentiment came just days after the RBA lowered the official cash rate by 25 basis points to 3.60 per cent.
'The RBA's forecasts also imply that rates will likely need to be a little lower to keep the economy on track, a point the RBA governor highlighted in the post-decision press conference' he said.
'That looks to have reinforced consumer expectations that mortgage interest rates are headed
lower, giving a broadbased boost to sentiment.'
Australia's Cash Rate 2022
It was the third interest rate cut of the cycle, with cash-strapped mortgage holders getting 75 basis points of rate relief since February.
Consumer sentiment first ticked up after the income tax cuts in the middle of last year and steadily rose on the back of each RBA rate cut.
Although there was a pause in sentiment in April when Australians feared the worst when US President Donald Trump announced his tariff policy
The rise was broadbased, with all five measures Westpac-Melbourne Institute lifted over the month.
The biggest lift was consumers feeling about their personal finances.
The 'family finances vs. a year ago' sub-index surged 6.2 per cent in August to 84.2, still a pessimistic read but only marginally below the long-run average of 88, while expectations about the 'family finances over the next 12 months' are up 5.4 per cent to 106.8.
Australians are also starting to feel optimistic about making big purchases. Australians now say it's a good time to buy a big-ticket item. NewsWire / John Appleyard Credit: News Corp Australia
The 'time to buy a major item' sub-index jumped to optimistic in the month of August as crossing the 100 mark.
The RBA rate cut gave a substantial boost to housing-related sentiment.
The 'time to buy a dwelling' index jumped 10.5 per cent to 97.8, a new four-year high and up 37 per cent on a year ago, albeit still well below the historic rate of 120.
Mr Hassan said the long run of consumer pessimism may finally be coming to an end, although he pointed out households should not expect back-to-back rate cuts.
'Further easing will likely be needed to sustain gains,' he said.
However, he said the RBA did not need to rush to cut rates further.
'Inflation is inside the RBA's target range and likely to stay there but the unemployment rate is still low by historical standards,' he said.
'We expect the board to take things meeting by meeting and respond to the flow of data as it comes in.'
The RBA monetary policy board next meets on September 29-30.