Consumer rate cut expectations rise

Westpac has a note out this morning looking at expectations for future rate cuts at large:

Most Australians expect mortgage interest rates to decline over the next year but the consensus is not strong.

• The Feb, Jun and Aug Westpac-Melbourne Institute Consumer surveys include an extra question about expectations for mortgage rates over the next 12 months. The Jun 2012 survey found that, of those with an opinion, 52% – an outright majority – expect rates to move lower, 25% expect them to move higher and 23% expect no change. That compares to the more even (and by implication more uncertain) distribution of responses in Feb.
• While the majority result indicates consumers have a firmer sense of where rates are likely to head, the consensus is not particularly strong. At 52%, the proportion expecting rates to fall is well short of the 70-90% that were calling rates to rise in surveys conducted in 2010-11 (Westpac first began surveying mortgage interest rate expectations in Feb 2010).
• The Jun survey detail also points to a lack of conviction. Responses over the course of the survey week – which was a very busy one for interest rate developments, economic surprises and the unfolding crisis in Europe – show significant daily fluctuations and a less certain view amongst those surveyed later in the week. The high and rising proportion saying they simply don’t know also suggests a more uncertain outlook for rates. For some specific groups such as renters and those in WA, 15-20% of consumers reported “don’t know/no opinion”.

The consensus may not be strong but a longer time series would useful in gauging whether it relatively strong. Note as well the very sensible dismissal of the bullhawks (red columns) that began early last year and is now approaching a level somewhere close to extinction.

Meanwhile, markets are still pricing an near 80% chance of rate cut at the next RBA meeting:

I remain quite unconvinced that another cut is coming so soon but certainly still coming.