A surprise interest rate cut by the Reserve Bank has not been enough to make Australians more confident about the state of the economy.
The Westpac-Melbourne Institute measure of consumer sentiment increased by just one per cent in October to remain below the level where optimists out-number pessimists.
Westpac chief economist Bill Evans described the result as disappointing given the Reserve's rate cut last week.
"Unlike some moves by the Bank which are fully expected by the media and therefore may not have a marked impact on confidence this move was not widely expected and therefore should have registered as a 'pleasant surprise' for respondents," he said.
"Instead we saw the sentiment of those folks with a mortgage hardly move with a miniscule 0.6 per cent increase."
Mr Evans said not only had the Reserve Bank surprised on the positive but unemployment had actually fallen to 5.1 per cent.
Even news from overseas had been better, feeding into an increase in the Australian share market.
Instead, consumers remained downbeat.
There were falls in expectations for the economy over the next 12 months and the next five years although current conditions improved.
The survey also found a 5.3 per cent increase in family finances compared to a year ago.
There was also a pick-up on the question of whether it is a good time to make a major household appliance purchase.
Mr Evans said it was increasingly likely the Reserve would use its Melbourne Cup Day meeting to cut official rates again.
"Our forecast for this cut has been in place since May this year with our forecasts around global uncertainty; softening domestic growth; a weak labour market and dormant inflation all setting the scene for another move by the bank," he said.
"In May we also pointed out that the overnight cash rate was unlikely to bottom out by year's end with a further cut to 2.75 per cent likely early in the new year.
"Evidence like today's underwhelming consumer sentiment report points to the need for further reductions in rates."ENDS
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