Another official Reserve Bank of Australia interest rate cut could be on the cards after the latest Melbourne Institute and Westpac Bank Survey of Consumer Sentiment revealed a 3.2 per cent decline in confidence, unwinding February's 8.0% increase in sentiment.
The survey showed a reading of 96.2 in April, down from 99.5 in March and 99.7 in April 2014. This in the lead up to the highly anticipated Commonwealth Budget next month. Following on from last year's horror budget, the markets are expecting more pain in large part due to the crash in commodity prices over the last 12 months.
While the lead up to the Budget was cited as one reason behind the heavy decline in consumer confidence, a rebound in petrol prices, job insecurity, a cloudy economic outlook and the lack of further official interest rate cuts from the RBA in March or April are also factors believed to have played a role in undermining consumer sentiment.
Shares of Australia's retail stocks fell heavily following the release of the report as investors contemplated the impact on their sales and earnings.
Kathmandu Holdings Ltd (ASX: KMD) continued its horror run, falling a further 3.8% to $1.28, while Myer Holdings Ltd (ASX: MYR), Retail Food Group Limited (ASX: RFG) and JB Hi-Fi Limited (ASX: JBH) fell 2.9%, 2.5% and 2.5%, respectively. Not even supermarket behemoth Woolworths Limited (ASX: WOW) could escape the market's wrath as the stock fell 0.7%.
The survey's results could certainly be the catalyst that forces the RBA's hand when its Board next meets on 5 May. Westpac's chief economist, Bill Evans, said: "We are extremely confident that the RBA will finally deliver the much anticipated second cut of 25 basis points on May 5." Although some economists have questioned the impact further interest rate cuts would have, it could be just the stimulus that consumers and businesses need to start spending again.
