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May 19, 2010    

Interest rate hikes take their toll on Australian consumers

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by Kay Murchie

A survey by Westpac bank and the Melbourne Institute has revealed that Australian consumer confidence has been hit by the recent hike in interest rates.

The study, which questioned 1,200 people, found that consumer morale in May fell for the second consecutive month - by 7% to a reading of 108.

This represented the biggest monthly fall since autumn 2008 - the time of the Lehman Brothers crisis.

However, confidence levels are still almost 22% higher than in May last year.

Earlier this month, the Reserve Bank of Australia (RBA) elected to lift interest rates from 4.25% to 4.5%.

Australia was the first economy to raise rates from a 50-year low as the economic downturn eased. Other major economies opted for lower interest rates to boost their economies.

The country is one of the few developed economies not to have fallen into recession like its counterparts throughout the world as it has benefited from an increase in commodity prices, while exports have received a boost due to demand from China for its iron ore and other raw materials.

Following the news, the Australian dollar fell to a eight-month low of $0.8515.

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