Australian consumers set to be Scrooges for Christmas, survey finds

Sydney

AUSTRALIAN consumer sentiment has taken a turn for the worse in December amid worries about the economic outlook and family finances, a troubling omen for the Christmas shopping season.

Wednesday's survey showed the Melbourne Institute and Westpac Bank index of consumer sentiment fell 1.9 per cent in December, from November when it bounced 4.5 per cent.

The index was down a hefty 8.9 per cent from a year earlier, and at 95.1 indicated pessimists continued to outnumber optimists.

Unhappily for retailers, the index of whether it was a good time to buy a major household item fell 2.1 per cent in the month, suggesting cash from lower interest rates and tax rebates was still not being spent.

At 115.4, the index remained well below its long-run average of 127.

The results of the survey of 1,200 people will be unwelcome news to the Reserve Bank of Australia (RBA), which has cut interest rates to a record low 0.75 per cent in part to support consumer demand.

Westpac chief economist Bill Evans noted the survey showed a pattern of sliding in months where the RBA cut rates, only to bounce the month after, suggesting consumers had been spooked by the moves.

When asked about the news on interest rates, 30 per cent of respondents saw it as favourable and 70 per cent as unfavourable.

"This is further evidence that the rate cuts in this cycle have had a much less positive impact on consumers than in past cycles," Mr Evans said.

The rest of the survey was no better. Its index of family finances compared to a year ago dropped 3.6 per cent, while the outlook for finances over the next 12 months dipped 0.5 per cent.

The outlook for economic conditions over the next year fell 1.1 per cent, and the index for the next five years slid 2.4 per cent. REUTERS