The sustained malaise reflected in the EY Future Consumer Index is reinforced by Westpac’s long term consumer sentiment data. In April, Westpac analysts noted that “outside of the deep recession of the early 1990s, this is easily the second most protracted period of deep consumer pessimism since we began surveying in the mid-1970s”4. Consumer confidence is locked in at well below pandemic levels.
With the lion’s share of Australians feeling somewhere between flat and anxious, the times are challenging for consumer-facing organisations and precarious for governments. The 2024 Federal Budget focused on measures to alleviate the pressure on households, but it came with words of caution. Treasurer Jim Chalmers noted the “considerable uncertainty” that makes Australia’s future hard to forecast and called the global outlook “fraught and fragile”.
Is it all that bad? The vibe versus the headline data
Over years of research, we have found Australian consumers typically adopt a more pessimistic outlook in times of economic tumult and uncertainty than their international peers – even when the performance of the economy should suggest a slightly less despondent outlook. At this point in time, the lead economic indicators are not significantly deteriorating, but we have higher proportions of Australians feeling worse and many feeling trapped in a holding pattern.
In the economy, we are at a point now where domestic unemployment remains low, the labour market is strong, immigration is at record highs and inflation is slowly moving back within the Reserve Bank’s target range. The International Monetary Fund’s global economic outlook for Australia is for modest growth.
A purely rational view would suggest the pessimism is overstated. However, consumers are driven by emotion and the current feelings are cumulative, viral and that’s where the contradiction lies.