Australia Consumer Sentiment At 3 1/2 Year High: Westpac

(RTTNews) - Australia's consumer confidence improved to a three-and-a-half year high in August as the central bank is expected to lower interest rates further after a third reduction this year, monthly survey results from Westpac showed on Tuesday.

The Westpac-Melbourne Institute Consumer Sentiment Index rose to 98.5 in August from 93.1 in July.

The improvement followed a further reduction in interest rates by the Reserve Bank of Australia. With the latest 25 basis points cut, interest rates dropped by 75 basis points since the start of the year.

Moreover, the bank forecast suggested that interest rates will likely need to be a little lower to keep the economy on track. This has reinforced expectations that mortgage interest rates are headed lower, giving a broad-based boost to sentiment, Westpac said.

All components of the consumer sentiment index improved in August.

The 'family finances vs a year ago' sub-index surged 6.2 percent to 84.2 in August but it remained pessimistic. At the same time, expectations became outright positive with the 'family finances, next 12 months' sub-index rising 5.4 percent to 106.8.

The 'time to buy a major item' sub-index advanced 4.2 percent to 101.7. Data highlighted that moderating inflation and steady wage growth continue to drive a gradual improvement.

Optimism about the Australian economy also showed improvement in August. The 'economic outlook, next 12 months' sub-index surged 7.6 percent to 101.2 and the 'economic outlook, next 5 years' sub-index climbed 5.4 percent to 98.4.

Together with monetary policy softening, easing tariff-related uncertainty after the US opted to leave the 10 percent tariff on Australian goods imports unchanged following the end of the 90-day negotiating period helped to underpin indices tracking expectations for the economy.

The Westpac-Melbourne Institute Mortgage Rate Expectations Index, which tracks consumer expectations for variable mortgage rates over the next twelve months, ticked up slightly to 83.6. Further, the survey showed that consumers remained relatively secure about the outlook for jobs. The Westpac-Melbourne Institute Unemployment Expectations Index declined 2.4 percent to 125.6 in August.

The 'time to buy a dwelling' index jumped 10.5 percent to a new four-year high of 97.8 in August.

Consumers were very bullish on dwelling prices. The Westpac-Melbourne Institute Index of House Price Expectations rose 0.9 percent to 164.2 in August.

Westpac head of Australian Macro-Forecasting Matthew Hassan said the RBA is likely to keep rates steady at its September meeting ahead of a further quarter point cut in November.