Australian consumer confidence has fallen to levels not seen since the dawn of COVID-19 lockdowns and the depths of Global Financial Crisis (GFC) despair, Westpac says, confounding hopes of strong sales through the traditionally busy November period.
In its latest Consumer Sentiment Index report, released Tuesday, Westpac found economic optimism fell from 83.7 points in October to 78 in November.
Consumer sentiment is “now below the low point of the GFC (79.0) and only slightly higher than when the COVID-19 pandemic first hit in April 2020 (75.6)”, the bank noted.
“Prior to that, we need to go back to the deep recession in the early 1990s to find a weaker read.”
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Consumer confidence was pummeled by poor household responses to the October federal budget, continual cash rate hikes stretching household budgets, and persistent cost-of-living pressures.
The federal budget, which steered clear of fiscal stimulus and forecast energy prices rising by 56% over the next two years, left a particularly sour note among survey respondents.
“The proportion responding that the October budget has worsened their financial outlook was a historically high 35%,” Westpac said.
The Reserve Bank of Australia’s recent decision to lift the cash rate 25 basis points to 2.85% has also dampened sentiment, with the increasing cost of servicing a loan or mortgage a critical factor for Australian households.
Respondents with a mortgage were particularly likely to dampen their outlook. Among that cohort, the Consumer Sentiment Index fell 15.7% to just 68.4 points.
“Given that the move was widely anticipated, the negative response likely reflects the clear signal from the Governor that further increases can be expected,” Westpac said.
Fears of falling consumer confidence through the Christmas sales period
The data casts a shadow over the November shopping period, spanning the ongoing Click Frenzy sales, the growing number of Singles’ Day shopping events on November 11, and the Black Friday to Cyber Monday double-header on November 25 and 28.
The Australian Retailers Association and Roy Morgan estimate Black Friday spending will hit $6.2 billion in 2022, far above the $5.4 billion it projected the year prior.
Australia Post has also forecasted a 3% year-on-year growth in online purchases across the five weeks to Christmas.
Indeed, household spending remains high, fuelled by strong savings buffers among much of the population.
On Tuesday, the Australian Bureau of Statistics found household spending in September 2022 was 19.8% higher in the current price, calendar adjusted terms than in pre-pandemic September 2019.
But the Westpac findings suggest households are quickly becoming more sensitive to extra expenses, undercutting some of those hopes of another massive spending bonanza.
Nearly 40% of survey respondents said they expect to spend less in the lead-up to Christmas this year compared to 2021, Westpac says, marking the “highest proportion planning cutbacks since we started asking the question in 2009, the average being 33%”.
Some data already tracks how fragile consumer confidence is bearing on Australia’s business community.
NAB’s Monthly Business Survey, also unveiled Tuesday, found its business confidence index fell four points to a flat zero in October, meaning respondents were equally positive and pessimistic about the economic outlook.
“The drop in confidence aligned with some softening in forward orders and reflected an increasingly negative global economic outlook and ongoing rate rises domestically,” NAB found.
Given the impact lower spending could have on local businesses, industry experts have urged shoppers to think carefully about where they do their Christmas shopping.
“As purse strings tighten, it’s also important to think about where you spend your money and choose local businesses,” said Chrissie Maus, general manager of Melbourne’s Chapel Street Precinct organisation.
This type of “local shopping altruism” can be an “elixir that energises not only our local economy but also ourselves,” she added.