-Bill Evans, Westpac chief economist
Consumer confidence in Australia dropped for a second consecutive month in April, reinforcing the view the Reserve Bank of Australia should consider further rate cuts. The Westpac-Melbourne Institute Consumer Sentiment Index tumbled 3.2% to 96.2 in April from 99.5 last month, as Australians felt increasingly concerned about the economic outlook and their personal finances. A figure above 100 indicates that optimists outweigh pessimists and vice versa.
Meanwhile, the International Monetary Fund warned that the RBA may need interest rate cuts again in case inflation continues its downward spiral. The central bank cut the key cash rate by 0.25% in February but kept it unchanged in March and April. Yet, the country managed to keep its top AAA sovereign rating. Moody's Investors Service said that Australia's top-notch credit rating is supported by the economy's large size, its flexibility and relatively strong growth as well as government debt ratios. The rating agency added that the expected slowdown in China, the world's second biggest economy, over the next two years could reduce Australia's resource-related investment and mining exports. Nevertheless, liquid natural gas exports will increase and, coupled with consumption growth, will keep Australia's economic output growth above 2% on average in 2015 and 2016.
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