WEEKEND ECONOMIST: Down but not out

The conflict between high capex and weaker consumer sentiment figures is perhaps not as surprising as first thought. Expect to see an uptick in sentiment when the bank cuts rates on October 7.

Nevertheless, the investment survey and associated profit reports highlight how the consumer bears most of the 'responsibility' for delivering and maintaining the RBA's desired slowdown. So far things are on track: Q2 was the weakest quarter for consumers since 1993. However this week's read from the Westpac Consumer Sentiment Index of a rise of 7 per cent following the 9 per cent rise in August would be mildly disturbing. Certainly, sentiment is still 7.5 per cent below the 100 level, indicating that pessimists still outnumber optimists. It has now been in that region for eight consecutive quarters – the longest run since the 1989–91 recession (which saw 57 consecutive quarters).

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