Consumer sentiment has increased slightly in February by 4.2 per cent from 96.1 in January to 101.1, according to the Westpac–Melbourne institute index of consumer sentiment

Westpac chief economist Bill Evans said this has been the strong result since the two Reserve Bank rate cuts.

“On the face of it this is a strong result and provides some lagged recognition from consumers of the two rate cuts which the Reserve Bank and the commercial banks delivered to mortgage and business borrowers in November and December,” he said.

“Recall that, until now, the overall Index was actually slightly below its pre-rate cut level in October. The Index is now 4 per cent above that benchmark.

“However the Index is still 5.2 per cent below the level of a year ago and 13.6 per cent below its level of two years ago.”

From this, Evans believes that more rate cuts need to be made before further improvement is seen. He also indicates Westpac’s disappointment in the RBA’s decision to not have provided further rate cuts when they met in February.

“We continue to believe that lower rates are required and the best policy response is to move earlier rather than delay. Accordingly we retain our view that a move in March is likely while emphasising that developments in the domestic economy, particularly around the labour market, will eventually force the Bank's hand even if they choose to defer in March," Evans said.