Confidence - 2

The Westpac Melbourne Institute consumer sentiment index came out yesterday showing that consumers were still happy after the rate rise. It leapt 1.7% in Oct to 121.4 points which is the highest since June 2007. It was 119.3 in Sept.

The index may be impacted later in the tightening cycle but not at the initial stages if experience from early 2002 is to be repeated. Household dept to income ratios are higher than then though so the impact of rate rises may start to bite a little earlier. They are now around 155% as opposed to 130% then.