Australians are ready to spend their way out of a recession with consumer confidence soaring by almost 20 per cent in a month, research from a big four bank suggests.
The way most states are staying on top of the COVID-19 pandemic has inspired Australians to feel more confident spending money, according to the Westpac-Melbourne Institute Index of Consumer Sentiment.
The survey, of 1200 adults conducted over the first week of September, found consumer confidence surged by 18 per cent to 93.8, renewing people’s optimism when it comes to buying property, saving money or looking for a job.
“Consumer confidence is returning to more normal levels,” Bill Evans said, chief economist at Westpac.
“Although, the sensitivity to progress in managing the virus and the opening up of economies remains key to the outlook.”
Going back to normal: Westpac
Consumer confidence was at 79.5 in August, a low level last seen during the Global Financial Crisis. It wasn’t the increase that came as a surprise, Mr Evans said, but rather the size of it and the speed of the rebound.
“We suspected last month’s 9.5 per cent collapse in the Index was an over-reaction, but this month’s 18 per cent rebound is a pleasant surprise nonetheless,” he said.
“... The rebound means the Index is now just 1.6 per cent below the average over the six months prior to the emergence of COVID-19 in March.”
Australia’s economy officially contracted by 7 per cent in the week the survey was conducted, according to figures from the Australian Bureau of Statistics, placing it in its first recession since 1992.
But Mr Evans said the country’s general management of the COVID-19 outbreak, where second waves have been largely avoided in NSW and Queensland, has helped people feel confident enough to spend.
The survey cannot account for consumer sentiment in Victoria after lockdown restrictions were prolonged, Mr Evans said, however he added the wildcard wouldn’t affect the upbeat responses of people from other states.
One reason for the returning confidence had to do with the federal government’s subsidies, he said.
“The impact of the Commonwealth Government’s fiscal support measures targeting households is apparent ,” Mr Evans said.
“Assessments of family finances are upbeat relative to a year ago whereas the economic outlook and assessment of spending conditions are still significantly weaker.”
Confidence in buying a property is slowly recovering
About 3 per cent more people believed it was a good time to buy a property at a score of 110 in September, the survey found.
This represented a lift in confidence, but it was still 6 per cent below the six-month average before COVID-19.
“(The index) continues to point to stabilising conditions in the housing market,” Mr Evans said.
“While house price expectations remain subdued, confidence appears to be building steadily despite recent recession announcements.”
More people want their money in a bank
When it comes to putting money aside, Australians generally prefer depositing it in a bank rather than investing in shares or property, and according to the nation’s statistical body, savings are at an all time high.
About 32.7 per cent of people preferred depositing their savings in a bank, Mr Evans said, which has crept upwards from 26.7 per cent over the year.
“The conclusion remains that Australians continue to hold extremely risk averse preferences for their savings,” he said.
The finding comes as Australians increased their savings threefold, according to the Australian Bureau of Statistics.
The household savings to income ratio increased by 19.8 per cent in the quarter ending June 2020, the ABS said, an increase from 6 per cent over the previous quarter.
Job prospects are improving: Westpac
The COVID-19 pandemic led to about 932,000 jobs being lost in the first six months of 2020, according to the ABS.
But job prospects appear to be improving, according to Westpac’s survey.
Employment sentiment rose by 14.8 per cent in September to a score of 139.2, representing a less severe dip than economists expected.
“While the general assessment of the current jobs market is still one of increasing job insecurity this measure has been telling us a more stable story,” Mr Evans said.
“Relative to the average level of the index in the six months prior to COVID-19 the index has deteriorated by only 3.3 per cent.”