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James Thomson is the editor of BRW. Previously he was editor and publisher of SmartCompany and a senior editor at Business Spectator. He writes regularly on Australia's wealthiest entrepreneurs and has deep expertise in small business and the mid market.

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Consumer sentiment hits two-year high as ASX tops 5000

Published 13 February 2013 12:09, Updated 26 February 2013 12:01

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Consumer sentiment hits two-year high as ASX tops 5000

Consumer sentiment has hit a two-year high, according to a report from Westpac.

Interest rate cuts may finally have had the desired effect. Consumer sentiment has hit a two-year high, according to a report from Westpac.

And the sharemarket rally has also continued, with the S&P/ASX 200 hitting 5000 points following strong results from Commonwealth Bank and CSL.

The index last cracked 5000 on April 5, 2010, but only stayed there for a day. Previously, the market was this high in September 2008. The ASX is now up almost 14 per cent since November 2012.

Consumer confidence rose 7.7 per cent, rising from 100.6 in January to 108.3 in February.

While confidence remains well below the levels seen back in 2008-09, when a series of RBA rate cuts saw confidence hit 120 points, Westpac’s chief economist Bill Evans says the rise is positive.

“The more positive February reading suggests lower interest rates may finally be starting to gain more traction with the consumer,” Evans said in a statement.

“Sentiment may have been buoyed by a strong start to the year for financial markets. The ASX rose 4.8 per cent between the January and February and surveys and is up 13.8 per cent from its mid-November low.”

Looking behind the overall sentiment figure, Evans says consumer expectations for “economic conditions over the next 12 months” jumped 14.7 per cent.

Despite the rise, Evans still expects the RBA to cut rates by 25 basis points at its March board meeting.

“The improvement will need to be sustained and flow through to actual spending and activity to ensure non-mining sectors of the economy are strengthening enough to counteract the downturn in mining investment that will begin in the second half of this year.”

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