Consumer confidence drops across Tasman

SYDNEY - Consumer confidence had been steadily rising all year in Australia, but it's come down to earth with a bump in the latest survey.

Confidence in the economy has fallen after the second consecutive interest rate rise, a survey shows.

The Westpac Melbourne Institute Index of Consumer Sentiment fell by 2.5 per cent to 118.3 in November, down from 121.4 in October.

The index rose in October by 1.7 per cent.

But Westpac's chief economist Bill Evans said consumer sentiment across the Tasman was still strong.

"Given that this fall comes after a second consecutive increase in the Reserve Bank's overnight cash rate and associated increases in variable mortgage rates it has to be classified as a modest response," Evans said in a statement.

"The level of the Index is still 38.3 per cent above its level from a year ago."

He said the average index reading of 119.7 over the past three months was only exceeded during four previous periods of strong optimism since the survey began in 1975.

The Index has fallen 0.8 per cent over all since the Reserve Bank of Australia began lifting interest rates in October, Evans said.

The central bank lifted the cash rate by 0.25 per cent in October and again in November, taking rates off a 49-year-low to its current 3.5 per cent.

"This is broadly comparable to the 0.7 per cent fall we saw in response to the beginning of the last rate hike cycle when the Bank raised rates by 0.25 per cent in both May and June 2002," he said.

"It seems reasonable that the level of rates is the dominant factor in determining households' responses to rate hikes."

All five component indices fell in November, the survey showed.

The family finances over the next 12 months category recorded the largest decrease of four per cent to 117.6, down from 122.6 in October.

Australian consumers were also more pessimistic about economic conditions over the next year, with the component index slipping 2.5 per cent to 128.1, from 131.4 in October.

The survey of 1,200 people aged over 18 was conducted between November 2 and 18, the same week the RBA lifted interest rates.

- AAP