Feb. 13 (Bloomberg) -- Australian consumer confidence surged by the most since September 2011 as interest-rate cuts gain traction, sending the local currency higher as traders boosted bets the central bank will hold rates steady next month.
The sentiment index for February jumped 7.7 percent to 108.3, a Westpac Banking Corp. and Melbourne Institute survey taken Feb. 4-8 of 1,200 adults showed today in Sydney. That was the strongest reading since December 2010 and the fourth-straight figure above 100 that indicates optimists outnumber pessimists.
Reserve Bank of Australia Governor Glenn Stevens and his board lowered the benchmark rate to 3 percent on Dec. 4, matching the level reached from April-October 2009 that was the lowest since 1960. The central bank, which paused this month, is seeking to rebalance growth and extend 21 recession-free years as a mining investment boom is predicted to peak in 2013.
“The more positive February reading suggests lower interest rates may finally be starting to gain more traction with the consumer,” said Bill Evans, Westpac’s chief economist. “Housing markets continued to show signs of recovery.”
The local dollar rose after the report, trading at $1.0338 at 10:51 a.m. in Sydney, from $1.0308 before the data. Traders are pricing in a 42 percent chance policy makers will lower the overnight cash rate target by a quarter-percentage point to a record-low 2.75 percent at their meeting next month, down from 52 percent before the release, swaps data compiled by Bloomberg show.
Australian house prices rose last quarter by the most since June 2010 as lower rates lured buyers back into the market. The nation’s benchmark stock index rose 4.9 percent last month.
In contrast, government data last week showed Australian retail sales unexpectedly fell for a third month in December, the longest stretch of declines in 13 years. Australian employers added part-time jobs in January and fewer people hunted for work, helping keep the unemployment rate unchanged at 5.4 percent, government data showed Feb. 7.
“We continue to see the case for lower rates as strong and expect the RBA to cut rates by another 25 basis points at its March meeting,” Evans said. “Today’s report will be an important input to policy deliberations but should not divert the board from other evidence around the economy’s momentum and prospects.”
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