Fresh economic figures out today show Australia's economy is slowing, just a day after the Reserve Bank slashed its key lending rate by the most in 16 years.
Consumer confidence plunged the most in more than two years, with the Westpac-Melbourne Institute consumer sentiment index diving 11%, or 10.2 points, to 82.0 in its October reading.
Separate figures from the Australian Bureau of Statistics also showed the number of new home loans in August slumped for a seventh straight month, the longest slide in 14 years. Loans for owner-occupied housing hit the lowest since March 2001, at 48,903, 2.2% lower than in the previous month.
"The deterioration in sentiment was expected," said JP Morgan economist Helen Kevans in a note to clients. "Financial market volatility also was elevated and the global economic outlook was deteriorating rapidly."
Banks globally have become increasing reluctant to lend to each other, worsening a financial crisis that originated with sub-prime housing loans in the US. Prime Minister Kevin Rudd and Treasurer Wayne Swan have been touting Australia's relative economic strength given its low unemployment level and exposure to rising commodity prices in recent years.
