Australia floods dampen consumer confidence in January

Australia floods dampen consumer confidence

Worries over the negative impact of the floods that hit Australia on its national economy have sent the consumer confidence index there to plunge to its lowest level in seven months.

In a survey conducted by Melbourne Institute and Westpac Banking Corp, the index declined to 104.6 from December's level of 111. It was the lowest mark since June 2010. About 1,200 Australian consumers were asked between January 10 and 16 for the survey which was issued today.

The same report said others who were unaffected by the floods viewed the Australian economy and their personal finances as "adversely affected."

The overnight cash rate target was pegged at 4.75 percent last month by Reserve Bank of Australia Governor Glenn Stevens. The move followed seven hikes in the rate since October 2009. Unemployment was kept around 5 percent due to investments in mining and energy. The pace of growth during the third quarter decreased because of increased borrowing costs.

In a statement, Westpac chief economist Bill Evans said, "Even before the advent of the floods, Westpac did not expect another rate increase until the second quarter of 2011. These tragic developments are likely to delay the next rate increase to the second half of 2011."

The death toll in Queensland's floods stood at 32. Swathes of crop land, many mines and homes were destroyed. Queensland's capital Brisbane experienced its worst flooding since 1974. Reconstruction work has begun and may cost the government up to $20 billion Australian dollars or $19.9 billion USD. That amount translates to about 1.5 percent of gross domestic product.

Posted by James Fried on Wednesday January 19 2011, 1:26 AM EDT. Ref: Bloomberg. All trademarks acknowledged. Filed under Featured News, Finance. Comments and Trackbacks closed. Follow responses: RSS 2.0