On the back of worries about rapidly rising interest rates across all major banks, consumer confidence in Australia dropped for the second consecutive month in December. As confirmed by the Westpac-Melbourne Institute index figures shared, consumer sentiments slipped 3.8% to 113.8 points for the month, as compared to 118.3 points for November.

It is to be noted that the number of people who had a positive outlook about the coming times still managed to outweigh those with a negative outlook.

For the third consecutive month in December, the Reserve Bank of Australia raised the cash rate to 3.75% after adding 25 basis points, considering this, says Westpac Chief Economist Bill Evans, the drop in index was "surprisingly modest".

"We expected that there was a real possibility that the index would fall much more sharply than the 3.8 per cent which it has registered. Note that after the RBA tightened by 25 basis points in March 2005 the variable mortgage rate was increased to 7.3 per cent from 7.05 per cent and the index fell by a massive 15.5 per cent", shared Mr. Evans.

The 18-24 age group of consumers surveyed gave particularly strong results, and this was the only age demographic to record a rise in confidence.