- Matthew Hassan, Westpac senior economist
The resource-rich economy is stuck in the transition phase, and future prospects are not clear. Nonetheless, investors are still confident about Australia's future outlook, as the economy managed to sell a$7 billion of its 12-year government bonds, making it the largest bond sale on record. This is a positive sign for Australian government, which seeks for additional funding to eliminate budget deficit and extend the length of the yield curve.
While investors are showing surprising resilience, the economy continues sending worrying signs, pushing the Aussie lower. This time the Melbourne Institute and Westpac Bank said a gauge of consumer morale plunged 0.7% in March, following a 3.0% decline. The reading itself stood at 99.5, the lowest since May 2013, and during the last year the indicator lost 10.0%. Moreover, a dip below 100-mark indicates more consumers are now pessimistic rather than optimistic. The largest decline among all sub-indices was recorded in the one that described economic outlook for the year ahead, which sank 4.0%. The measure of households finances over the next year turned lower 2.3%, while the index describing families' intentions to buy a major item fell 1.0%. Companies are showing their intentions to cut staff, suggesting the labour market will struggle as well. While the RBA claimed their satisfaction with the current monetary policy, the recent fundamental data is raising concerns the easing cycle is not over yet.
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