Australian Consumer Confidence Falls 3.8% in December

Dec. 9 (Bloomberg) -- Australian consumer confidence fell in December after central bank Governor Glenn Stevens increased borrowing costs for an unprecedented third straight month.

The sentiment index dropped 3.8 percent to 113.8 points, according to a Westpac Banking Corp. and Melbourne Institute survey of 1,200 consumers conducted between Nov. 30 and Dec. 6 and released today in Sydney.

Falling consumer confidence may give Governor Stevens scope to keep the benchmark lending rate unchanged at 3.75 percent when his board next meets in February, after quarter percentage point increases in October, November and this month. A report tomorrow may show Australia’s unemployment rate rose in November to 5.9 percent from 5.8 percent, say analysts surveyed by Bloomberg News.

“This is a surprisingly modest fall in the index given recent developments on interest rates,” said Bill Evans, chief economist at Westpac Bank in Sydney. “We must be getting close to levels of the variable mortgage rate where households become much more sensitive than is currently the case.”

The Australian dollar traded at 90.27 U.S. cents as of 10:34 a.m. in Sydney from 90.23 cents before the report was released.

Stevens this month became the only central bank chief in the world to raise borrowing costs three times this year, citing a surge in consumer and business confidence as well as rising demand from China for exports such as iron ore and coal.

Business confidence jumped in November to the highest level in more than seven years, according to a National Australia Bank Ltd. survey published on Dec. 8.

Looking Good

“At the beginning of the year I would not have expected the economy be looking as good as it does” now, Stevens said late yesterday in Sydney. “I thought things would turn out rather worse than they have. But who’s complaining? Not me.”

Investors are betting there is a 42 percent chance of an interest-rate increase at the central bank’s next meeting in February, according to Bloomberg calculations based on interbank futures on the Sydney Futures Exchange late yesterday.

All of the five components of the index fell in December, led by an 8.9 percent drop in sentiment among households with a mortgage, today’s report said.

Assessments of whether now is a good time to buy major household items declined “only 2.3 percent,” Evans said.

“Retailers should derive considerable comfort from the relatively modest fall,” he said.