Whats happening in 2012 which might influence

The Westpac–Melbourne Institute Consumer Sentiment Survey registered a slight improvement in the first two months of 2012 despite the RBA’s surprise decision to leave interest rates on hold at its Feb meeting and concerns that commercial banks would raise rates regardless (their decisions to do so came after our survey closed).
We suspect the improved situation in Europe, the flow through to the AUD and local sharemarkets, and the positive financial effects of the Nov-Dec rate cuts were key positives for sentiment. 
While the survey detail suggests a slightly bigger knock to underlying confidence from the RBA decision, a detailed breakdown of our extra question on interest rate expectations also suggests consumers may have been less convinced further rate cuts were on the way in the first place.
Labour market conditions were most clearly not behind the firmer sentiment readings. Consumers’ unemployment expectations instead deteriorated quite sharply in the first two months, particularly in the resource states that had led a previous improvement. 
Consumers may be more positive on the economy but appear much less convinced about their job security in 2012. 
Overall the theme of the survey in early 2012 appears to be uncertainty. Sentiment may have improved and been resilient to interest rate issues but it is still at a tepid level overall. Job security remains a key issue and there is little consensus around which way key aspects of the domestic economy – interest rates and housing markets – are heading over the next year. 
There may be little guidance near term either. Official labour market data released the week after the survey showed a strong Jan result. But against this we continue to see a steady stream of lay-off announcements in the first few weeks of 2012. 
Policy-wise, the RBA now looks set to stay on hold for a few months. We think there are another two rate cuts still to come but May and July now look to be the most likely timing with official rhetoric likely to sound neutral near term.