SYDNEY, Aug 16 (AFP): Consumer confidence in Australia plunged 16.2 per cent in August, its second-largest drop in more than 30 years as rising interest rates began to bite, according to a survey released today.
The monthly Westpac-Melbourne Institute Index of Consumer Sentiment said that consumer confidence dropped from 107.4 points in July to 90.0 points in August, Westpac Banking Corp said.
The bank's chief economist Bill Evans said that figure was the lowest since March 2001, when there was widespread concern of a global recession.
The fall was the second-largest since the index was introduced in 1975, compared with a 16.6 per cent drop in June 1989 as the Australian economy sank into recession.
"The interest-rate rise on August 4 is undoubtedly the major cause of the collapse in sentiment," Evans said, referring to the Reserve Bank of Australia's hike that took interest rates to 6.0 per cent.
He said spiralling petrol prices, which have stayed above 1.30 dollars (US 99 cents) a litre since April, were also having an impact.
"With a 30-year low in the unemployment rate and upward momentum in the housing market, this result may represent a short-term over-reaction," said Evans.
Nevertheless the central bank was "most unlikely" to hike interest rates again when it meets on September 5, he said.
"This collapse in consumer sentiment will be a critical input into the decision process," he added. "It is the first measure of the impact of the August 4 rate increase."
He said inflationary pressures in the economy would likely see the Reserve Bank decide to raise rates for the third time this year when it meets on November 7.