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Australian Consumer Sentiment Improves in December

Australian consumer sentiment improved in December as relief over the central bank's decision not to raise interest rates enhanced confidence in the economy, a survey showed on Wednesday.

The Westpac-Melbourne Institute consumer sentiment index firmed 1.8 percent to 112.5, recouping some of November's 4.2 percent drop. The index was 5.9 percent higher than in December last year.

"This is a solid result," said Westpac chief economist Bill Evans. "It comes at a time when petrol prices have increased by 8.3 percent over the month," he added. "Global capital markets have been in turmoil and major bank executives have been warning of the need to pass on higher funding costs to borrowers."

Sentiment had dipped in November after the Reserve Bank of Australia (RBA) raised interest rates to an 11-year peak of 6.75 percent, the fifth tightening since May last year.

However, last week the RBA skipped a chance to tighten again at its December meeting, citing uncertainty about the global economy and rising market interest rates.

"Households would have been buoyed by the RBA's decision to hold rates steady," said Evans.

There was a sharp 9.7 percent rise in the index assessing the outlook for economic conditions over the next 12 months, while the index measuring current family finances rose 4.5 percent.

In contrast, respondents were less optimistic about their finances over the coming year, with that index falling 6.4 percent. There was also a 1.6 percent drop in the outlook for the economy over the next five years.

In a promising sign for retailers ahead of the Christmas shopping season, the time to buy major household items index rose 3.3 percent in December.

But higher interest rates and low affordability continued to plague the housing market. The index measuring whether now is a good time to buy a dwelling fell by 4.5 percent, leaving it down 22.6 percent over the year.

A change of government also had a diverse impact on sentiment. The confidence of victorious Labor Party voters surged by 15.6 percent, while the confidence of supporters of the ousted Liberal National Coalition fell by 16.2 percent.

Contact Asia Economy

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