MAKING NEWS

Thu, 17 May 2012
Consumers still glum despite rate cut By Alicia Barry
Worries about the economic stability of the eurozone continue to weigh on consumer confidence despite the Reserve Bank slashing the cash rate this month, a closely watched survey has found.

The monthly Westpac-Melbourne Institute Index of Consumer Confidence ticked up just 0.8 per cent to a reading of 95.3 in May, just a slight improvement on the eight-month low recorded in April.

A reading below 100 indicates more consumers are pessimistic than optimistic.

Westpac chief economist Bill Evans says confidence among those with mortgages increased by just 3 points after the 50-basis-point cut to interest rates, which was a much weaker result than he expected.

"People are unnerved by what's happening in Europe," Mr Evans said.

"It's a bit of a repeat run from what's happening in December last year when the concerns in Europe were at their peak. But of course we're starting to see building concerns along those lines again.

"I think there is an element to mortgage rates not coming down by as much as the RBA cut official interest rates."

Thirty-six per cent of those surveyed believed the federal budget would worsen their financial situation, and Labor voters were much more optimistic than their Liberal counterparts.

When the survey respondents were sorted by the type of work they do, professional workers and managers were the most negative.

Mr Evans says it is hard to quantify why they had such a gloomy outlook.

"We know that they tend to be more sensitive to the European situations but because we don't specifically question them on the reasons for their lack of confidence you're only really speculating," he said.

"I think its much safer to look across the overall population."

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