By Jacob Greber May 19 (Bloomberg) -- Australian consumer confidence tumbled by the most in 19 months after the central bank boosted borrowing costs for the sixth time since October and concern about European debt triggered turmoil on financial markets. The sentiment index fell 7 percent to 108 points this month, according to a Westpac Banking Corp. and Melbourne Institute survey of 1,200 consumers conducted between May 10 and May 16 and released today in Sydney. Australia’s currency dropped to its lowest level in eight months as investors bet central bank Governor Glenn Stevens will slow the pace of future interest-rate increases. Retail sales during recent months have been “challenging,” Mark McInnes, chief executive of David Jones Ltd., the nation’s second-biggest department store chain, said today. Consumers “have lost their buoyancy with respect to the economic outlook,” said Bill Evans, chief economist at Westpac Bank in Sydney. “The re-emergence of global economic nervousness would clearly also be weighing on respondents.” The Australian dollar slumped to 85.64 U.S. cents at 1:01 p.m. in Sydney from 86.04 cents just before the report was released. The two-year government bond yield rose 2 basis points to 4.52 percent. A basis point is 0.01 percentage point. The central bank’s most aggressive round of interest-rate increases among Group of 20 institutions have driven variable mortgage rates to around 7.4 percent, said Westpac’s Evans. ‘Hurt Consumers’ “We are clearly back in that range for the variable mortgage rate where future rate hikes are going to hurt consumers,” Evans said. “Prospects for the housing market are deteriorating.” A gauge of whether now is a time to buy a dwelling tumbled 15.4 percent to 88.2, which is 35.6 percent below its long-run average, Westpac said today. “The index has only been at lower levels in 2008, 2004 and the early 1990s.” The central bank has increased its overnight cash rate target by 150 basis points since early October, pushing the rates paid by most home buyers and businesses to their “average level,” according to policy makers. Australian home-loan approvals fell in March for a sixth straight month, dropping 3.4 percent, a report showed on May 12. “Increases in interest rates to date had been timely” with signs that the moves were “beginning to affect behavior” of consumers and home buyers, Reserve Bank of Australia officials said in minutes released yesterday in Sydney of their May 4 meeting. Next Move Traders are betting there is next to no chance of a quarter-point rate increase at central bank monthly meetings before November, according to Bloomberg calculations based on interbank futures on the Sydney Futures Exchange at 1:03 p.m. The bank isn’t certain to move until February, the futures show. A gauge of household expectations about their finances over the next 12 months fell 3.6 percent and a measure of whether now is a good time to buy major household items slipped 3.4 percent, today’s Westpac report showed. The sentiment report “seems to be in line with the slowdown in retailing over recent months,” which rose just 0.1 percent in the first quarter, said David de Garis, a senior economist at National Australia Bank Ltd. in Melbourne. “As we expected, trading in the third quarter has been challenging, although in line with our forecasts,” said David Jones’ McInnes in a statement today. The company’s fiscal year ends on July 31, and its third quarter runs through to the last Saturday of April. Too Quickly Stevens and his board raised interest rates too quickly and aren’t likely to increase borrowing costs further in coming months due to concerns of a second global slowdown, two former policy makers said in interviews last week. “They could have paced themselves a bit more and not been so keen,” Bernie Fraser, governor of the central bank from 1989 to 1996, said in a phone interview May 9. A separate report today showed an index measuring the number of jobs available for skilled workers rose 1 percent in May from April, the weakest pace in almost a year. By contrast, Australian wages grew at the fastest pace in more than a year, gaining 0.9 percent from the fourth quarter, when they rose 0.6 percent, the statistics bureau said today. The median estimate of 20 economists surveyed by Bloomberg News was for a 0.8 percent gain. To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net

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