12 April 2019
Bob Cunneen, Senior Economist and Portfolio Specialist
Source: Westpac Melbourne Institute, Australian Bureau of Statistics and Datastream.
The Australian consumer appears subdued. The Westpac Melbourne Institute (WMI) measure of consumer sentiment (red line) came in at 100.7 in April 2019. This shows that ‘optimists’ only narrowly exceed ‘pessimists’ by 0.7%. Indeed the current WMI sentiment is just below its past decade average of 102, indicating a careful and cautious Australian consumer.
Why is sentiment so subdued? Concerns over falling Australian house prices, slow incomes growth and high household debt seem to be weighing on consumer minds. Global factors may also be a negative contributor such as the global trade tension and the Brexit debacle.
The subdued sentiment result helps explain the slowdown in consumption over the past year. Real consumer spending is running at only 2% annual growth (blue line). This is well below the 2.6% average consumption growth for the past decade. So sentiment seems to be the ‘canary in the coal mine’ for retailers and the corporate sector.
Yet there are some hopeful signs for Australian consumers. The labour market remains solid judging by latest jobs growth. Even the recent Federal Budget should encourage consumers to lift the sentiment and spending with a $7 billion tax rebate to low and middle income earners. So the Australian consumer canary is still on its perch, but does need to get more chirpy about the future.
This communication is provided by MLC Investments Limited (ABN 30 002 641 661, AFSL 230705) (“MLC”), a member of the National Australia Bank Limited (ABN 12 004 044 937, AFSL 230686) group of companies (“NAB Group”), 105–153 Miller Street, North Sydney 2060. An investment with MLC does not represent a deposit or liability of, and is not guaranteed by, the NAB Group. The information in this communication may constitute general advice. It has been prepared without taking account of individual objectives, financial situation or needs and because of that you should, before acting on the advice, consider the appropriateness of the advice having regard to your personal objectives, financial situation and needs. MLC believes that the information contained in this communication is correct and that any estimates, opinions, conclusions or recommendations are reasonably held or made as at the time of compilation. However, no warranty is made as to the accuracy or reliability of this information (which may change without notice). MLC relies on third parties to provide certain information and is not responsible for its accuracy, nor is MLC liable for any loss arising from a person relying on information provided by third parties. Past performance is not a reliable indicator of future performance. This information is directed to and prepared for Australian residents only. MLC may use the services of NAB Group companies where it makes good business sense to do so and will benefit customers. Amounts paid for these services are always negotiated on an arm’s length basis.