MNI ANALYSIS:Australia Sentiment Up But Job,Spend Outlook Soft

--Westpac-MI Consumer Sentiment Above 100 for 9 Straight Months

--Reduced Rate Rise Worries Help Sentiment Stay Elevated

By Sophia Rodrigues

     SYDNEY (MNI) - Consumer sentiment fell in August and while it remained in

the optimistic territory, it pointed to worsening outlook for labor market and

household spending which pose a risk to the Reserve Bank of Australia's outlook

for next move in the cash rate to be up.

     Data published by Westpac-Melbourne Institute Wednesday showed consumer

sentiment fell 2.3% m/m to 103.6, giving back half of the surprisingly strong

gains seen in June and July. But even after the decline, sentiment remained

above the 100 mark for nine months in a row.

     The latest decline was mainly due to fall in outlook for the economy over

the next year and the next five years.

     Outlook on future family finances and time to buy major household items

also fell, and both are risks to the RBA's outlook for household consumption.

     The survey showed reduction in fears about rate rise may be a reason for

overall elevated sentiment. The response to question on outlook for interest

rates, asked every six months, showed just below 50% expect rates to rise over

the next year, down from 58% in February and 61% in August last year.

     The survey also showed a shift in labor market outlook, with the index of

unemployment expectations rising in August and was 7.2% above the February low.

The index, which is a measure of consumers' sense of job security is back near

long-run average levels, suggesting consumers expect little change in the

unemployment rate over the next 12 months.

     Views on the housing market were mixed. The "time to buy a dwelling" index

rose 5.5% to be 15.1% higher y/y and could be attributed to recent declines in

housing prices and easing rate rise fears. Expectations on house prices

stabilized after a sharp 13.1% drop over the previous two months.

     Westpac's chief economist Bill Evans maintained his view that the RBA will

leave the cash rate on hold both in 2018 and 2019.

     "Certainly it will be quite some time before the Bank (RBA) has a case to

adjust the cash rate," he said.

     From Westpac-Melbourne Institute Index of Consumer Sentiment for August

published Wednesday:

                                        August   July

-----------------------------------------------------

Sentiment Index                          103.6  106.1

Current-Conditions Index                 105.4  106.6

Expectations Index                       102.5  105.7

Family Finances Vs Year Ago               88.3   88.8

Family Finances Next 12 Months           106.0  107.2

Economic Conditions Next 12 Months       100.3  105.5

Economic Conditions Next 5 Years         101.1  104.3

Good Time to Buy Major Household Items   122.4  124.5

--MNI Sydney Bureau; tel: +61 2-9716-5467; email: sophia.rodrigues@marketnews.com

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