Australian consumer confidence was up for the second consecutive month, indicating that the easing petrol prices may have made up for the Reserve Bank’s rate hikes. The Roy Morgan Consumer Confidence Rating, released today and taken at the end of September and beginning of October, showed a rise of 7.2 points to 115.8.

Consumer confidence has regained almost the entire loss that occurred in August when consumers were suffering from elevated fuel prices and the August 2 rate hike. The October rating is a significant 12.1 points higher than the August rating of 103.7.

The average price of petrol in Melbourne and Sydney has recently fallen to around $1.12 a litre, compared to the August Australian average of $1.37 — a saving of 25 cents a litre.

The Roy Morgan Consumer Confidence Rating is based on Australians’ ratings of the national economy, the buying climate and their personal finances. The rating has ranged from a high of 124.5 in February to a low of 103.7 in August this year.

The August plunge in confidence was reflected somewhat in the August retail trade figures released on Tuesday by the ABS. Although overall retail trade rose 0.3% in August (following a downwardly revised 0.5% increase in July), department store sales declined 7.2%.

The New Zealand Roy Morgan Consumer Confidence Rating, also released today, shows consumer confidence across the Tasman to be steady. Currently, the New Zealand rating sits at 123.4, down 0.4 points from the September rating of 123.8.

It appears that falling petrol prices have staved off fears of a hard landing for the New Zealand economy, although Reserve Bank Governor Alan Bollard has not ruled out hiking interest rates again to ward off inflation, which currently sits around 4%. Currently, the New Zealand official cash rate sits at 7.25% — 1.25% more than the Australian rate.

The crucial question at this stage, for both Australia and New Zealand, is whether the recent interest rate hikes have weakened aggregate demand enough to pull the inflation rate to within the 2-3% goal, or whether more hikes are warranted. In relation to Australia, Henry of course considers 4% headline inflation to be much too high, and believes RBA will need at least two more hikes to rein it in.

Read more at Henry Thornton.