"The improvement, if sustained, indicates that the Reserve Bank's series of rate cuts which began in November 2011 are finally gaining strong traction with households."
- Bill Evans, Westpac's chief economist
The $1.5 trillion economy is in serious need of structural reforms, which were already promised by the incoming government, pushing both consumer and business mood higher. On Tuesday figures showed strengthening in mood among Australian businesses, while Wednesday's report from the Westpac Melbourne Institute showed a gauge of consumer confidence surged to the highest level since December 2010. A gauge of sentiment ticked up 4.7% to 110.6 in September, up from 105.9 a month earlier, moving further from the 100 threshold that indicates optimism outnumbers pessimists.
Australian central bank has made eight adjustments to its key interest rate since November 2011, in attempt to drive growth in the struggling economy, and supported by the policymakers' actions, sentiment among Australian consumers rose 13.8% since the RBA began cutting rates. Moreover, the corresponding index is now 9.9% above the average level over the period since the first rate cut. And even though the economy is performing below levels seen during the boom from the mining sector, it has expanded more than expected in the second quarter and the prospect of a change of government and possible rate cuts are positively affecting domestic consumers and companies, suggesting the economy can get additional lift from increased spending.
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