Consumer confidence has dropped to a four-year low, and future economic conditions to levels not seen since 1994, as Australians contemplate the economic losses arising from the catastrophic bushfires ravaging the nation.
The ANZ-Roy Morgan Consumer Confidence index saw consumer sentiment slump by 1.7 per cent in the first week of 2020 alone.
Roy Morgan said that confidence is usually buoyed at the start of a new year, making the fall this year “unusual”.
“Against the backdrop of the weekend’s catastrophic bushfires, it is not surprising that consumer confidence declined. But the reported decline of 1.7 per cent since the last survey in mid-December understates the weakness when one considers that the New Year usually sees a strong gain in sentiment,” said ANZ’s head of Australian economics, David Plank.
“Between 2010 and 2019, the average gain in confidence for the first week of January has been 3.4 per cent. Against the usual seasonal gain of recent years, confidence has started 2020 in very poor shape and at its lowest level in more than four years.”
Indeed, sentiment around current economic conditions plummeted “a massive” 12.9 per cent, according to the index, putting it at its lowest level since the global financial crisis (GFC) of 2008–09.
Meanwhile, confidence in future economic conditions sank to the tune of 8.1 per cent, which Roy Morgan and ANZ put the measure “at its lowest level since 1994”.
Mr Plank suggested the timing of the falls is hardly coincidental.
“The fact that this is due to sharp falls in both the current and future economic outlooks indicates to us that the bushfires are almost certainly the key cause,” he said.
“In contrast, consumers’ sentiment towards their own financial circumstances has actually risen since mid-December. This offers the prospect that the impact on overall consumer confidence from the weekend’s terrible events may be relatively short-lived.”
According to the economist, the federal government’s policy steps outlined in recent days — including a $2 billion injection of funds into a new relief agency and income support payments for some volunteer firefighters, including the self-employed — add weight to this being a temporary setback in consumer confidence.
“We are mindful, of course, that there is likely still bad news to come about the impact of last weekend’s fires. There is also a lot of hot and dry weather to come before the bushfire season is over,” Mr Plank said.
“The weakness in overall consumer sentiment suggests that consumer caution towards spending in recent months will continue, despite the relative health of their personal financial circumstances.”
He added: “We expect retail sales to have rebounded modestly in November, in part due to the Black Friday sales. But the boost may be short-lived.”
The only bright spot in the index was a surge in sentiment about now being a good time to buy a household item, which surged by 4.8 per cent — recovering most of the 6.4 per cent drop recorded last month.
The latest consumer sentiment analysis comes after separate polls in late December pointed to tough trading conditions for Australian businesses in the year ahead.
Meanwhile, Harris Scarfe has become the latest retail casualty, announcing a third of its stores are set to close as the struggling department store chain attempts to find a buyer to pull it out of receivership.
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.