A major bank economist has conceded that the big four's decision to pass on only part of the RBA's 50bp cut has dented consumer sentiment.
The Westpac Melbourne Institute Index of Consumer Sentiment saw only a 0.8% bump in May, a result Westpac chief economist Bill Evans said was disappointing considering the Reserve Bank's rate cut and a surprise decline in unemployment. But Evans said the positive economic news did little to brighten Aussies' mood.
"Other factors appear to have offset these positives. Firstly there might have been a degree of disappointment amongst households that the standard variable mortgage rate was reduced by ‘only’ an average of 0.37%. Secondly, increasingly disturbing news around Europe and specifically Greece is likely to have unnerved households," Evans said.
Evans said similar woes plagued consumers following the Reserve Bank's last rate cut in December, when consumer sentiment actually fell by 8.3%. He said a number of issues had "unnerved" households.
"Firstly, and most importantly, concerns around the situation in Europe and secondly some confusion around the flow on to the mortgage rate as banks delayed their decisions after having responded rapidly following the first official rate cut in November. This issue around mortgage rates was also likely to have been a factor behind the 5.0% fall in the Index in March following a surprise increase in mortgage rates of 0.10-0.12%," he said.
Evans predicted that the marginal rise in confidence would disappoint the RBA, given that the index was 2% below its level in October when the cash rate was a full 100bps above its current level.
Homeowners hardest hit by confidence drop
Bank hikes could scuttle confidence recovery
Consumers subdued despite rate reprieve