The Westpac–Melbourne Institute Consumer Sentiment Index increased by 0.2 per cent to 117.3 in March from 117.0 in February.
“This is a solid result given the backdrop of a fourth official rate rise,” Westpac's chief economist Bill Evans commented.
“However the previous rate hike cycle and the March sentiment reading suggest mortgage rates have not reached the point where increases have a major impact on confidence.
“Since the last survey the Reserve Bank raised the overnight cash rate by 0.25 per cent from 3.75 per cent to four per cent and the banks increased their variable mortgage rates by an equivalent amount. The variable mortgage rate is now averaging around 6.9 per cent.”
According to Evans, history suggests seven per cent is a significant threshold mortgage rate for consumers and so we may be nearing the point where confidence becomes much more sensitive to increases in interest rates.
“Of course households are holding significantly more debt than during that last period. Debt to income ratios are around 20 per cent higher today than they were in 2003. And that may make them more sensitive to rises this time around.”
Consumers are slightly more positive with respect to their family finances with responses to ‘family finances compared to a year ago’ increasing by 1.4 per cent, while responses to ‘family finances over the next 12 months’ increasing by 5.5 per cent. The economic outlook deteriorated a little as views on ‘economic conditions over the next 12 months’ fell by 1.9 per cent while expectations for ‘economic conditions over the next five years’ were down by 2.7 per cent. There was little change in spending intentions. Opinions on ‘whether now is a good time to buy a major household item’ were down by 0.5 per cent.