(Bloomberg) -- Australia’s interest-rate cuts failed to gain traction as households’ worries about the economic outlook sent consumer confidence slumping to a two-year low.
The sentiment index fell 4.1% to 96.5 in July, the weakest reading since August 2017, Westpac Banking Corp. said in a statement Wednesday. The biggest decline was in the sub-index tracking expectations for the economy in the next 12 months, which plunged 12.3%.
The Australian dollar fell after the report, and was down 0.1% to 69.24 U.S cents at 10:37 a.m. in Sydney.
“The fall in sentiment this month is troubling as it comes against what should have been a supportive backdrop,” said Matthew Hassan, Westpac senior economist, noting the combination of lower rates, tax cuts and a stabilizing housing market. “The main driver continues to be deepening concerns about the outlook for the Australian economy and prospects for family finances.”
Australia’s central bank executed its first back-to-back rate cuts in seven years in June and July to try to kick start economic growth that has decelerated sharply.
The consumer gloom is more surprising given the unexpected victory of Prime Minister Scott Morrison’s center-right government, which put an end to opposition plans to scrap tax breaks on property investment that were expected to deepen a recent property downturn.
The government has managed to pass its tax package that brings some immediate relief to households and the prospects of further reductions next decade.
“Deteriorating expectations for the economy outweighed any near-term support from the prospect of lower interest rates and tax relief,” Hassan said. “The sub-index tracking consumers’ expectations for ‘finances, next 12 months’ also recorded a sharp 8% fall, moving back into net pessimistic territory for the first time since late 2017.”
The survey was based on responses from 1,200 people and conducted between July 1 and 5. The central bank cuts rates by a quarter-point to a record-low 1% on July 2.