Consumer confidence nosedives, but household spending rises

The ANZ-Roy Morgan Consumer Confidence dropped 5.5pts to 78.1 this week and is now 25.1pts below the same week a year ago.

Driving this week’s decline in consumer confidence was increasing concern in three key indicators including the performance of the Australian economy over the next year, a comparison of personal finances compared to a year ago, and whether now is a ‘good/bad time to buy’ major household items.

Consumer confidence was down in all five mainland states this week and under 80 in all of them except Western Australia.

Now 19 per cent of Australians said their families are ‘better off’ financially than this time last year (the lowest figure for this indicator for nearly three years since April 2020) compared to 49 per cent who said their families are ‘worse off’ financially.

Looking forward, under a third of Australians, 31 per cent, expect their family to be ‘better off’ financially this time next year while just over a third, 35 per cent, expect to be ‘worse off’.

Only 7  per cent of Australians expect ‘good times’ for the Australian economy over the next 12 months compared to over two-fifths who expect ‘bad times’.

Sentiment regarding the Australian economy in the longer term is still very weak with only 13 per cent of Australians expecting ‘good times’ for the economy over the next five years compared to 18 per cent expecting ‘bad times’.

When it comes to buying intentions 17 per cent of Australians said now is a ‘good time to buy’ major household items (the lowest figure for this indicator for nearly three years since early April 2020) while over half, 54 per cent, said now is a ‘bad time to buy’ (the highest figure for this indicator for nearly three years since early April 2020).

ANZ senior economist, Adelaide Timbrell, said the average confidence among people paying off their mortgages fell sharper than other housing cohorts last week by 10pts to its lowest since early April 2020.

Meanwhile, the Australian Bureau of Statistics revealed that household spending rose 11.2 per cent in December 2022 compared to the same time last year.

Robert Ewing, head of business indicators at the ABS, said the growth rate in total household spending continued to ease in comparison to previous months after peaking at 29.2 per cent in August.

“In December, all spending categories recorded through-the-year increases, with services showing more strength than goods,” he said.

Through-the-year discretionary (+8.1 per cent) and non-discretionary (+14.8 per cent) spending rose in December after these categories peaked at similar levels in August (+28.1 per cent and +30.2 per cent, respectively).

In December, the increase in discretionary spending was driven by recreation and culture while transport made the strongest contribution to the rise in non-discretionary spending.

All states and territories saw increased household spending in December 2022 compared to December 2021.

Victoria recorded the largest increase in spending (up 13.9 per cent) with strong growth in transport (37.7 per cent) and hotels, cafes, and restaurants (21.1 per cent). Compared to November 2022, the through-the-year rises in December were lower in all states and territories except Victoria and the ACT. 

“Household spending on services rose 22.7 per cent compared to December 2021, driven by increased spending on transport (up 31.0 per cent), as air travel demand continued to grow strongly,” Mr Ewing said.

Strong growth was also seen in hotels, cafes, and restaurants (21.8 per cent) and miscellaneous goods and services (12.6 per cent).

In contrast, spending on goods recorded a more moderate rise of 2.7 per cent through the year.