Rate cuts would send the wrong message

A drop in consumer sentiment and a rise in the unemployment rate has fuelled Australia's economic pessimists, but there's more to the data than meets the eye.

Pessimism is building in Australia. Only this week, the market learned that consumer confidence dropped 5.7 per cent (December figures). A fall that, at least notionally, shows consumers at their most anxious in more than three years. Indeed, confidence is back down to where it was in the wake of the GFC! Meanwhile, business confidence has declined to its lowest point in over a year.

Legitimate questions can be raised, however, as to whether all of this pessimism is justified.

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