Consumer anxiety fell for the second straight quarter in Q2 2019, led by a post-election fall in anxiety arising from government policy.

Concerns over the cost of living also moderated but still contributes most to overall anxiety. Consumers were also less anxious about their health and ability to fund retirement, but their concern over job security increased again. On balance, consumers said their household income and savings decreased in the last 3 months, but expectations for the next 12 months are positive.

Deleveraging was also a key theme for consumers in Q2. On balance, more consumers paid down their debt and they expect to continue doing so over the next year. Spending behaviours were slightly less conservative, but caution is very evident when spending on non-essentials – particularly eating out, entertainment, major household items and personal goods. Overall spending on essentials also fell a little, with utilities still the major expense. On housing, more consumers on balance indicated it was a good time to buy a property or renovate, but not to sell suggesting they see market conditions still weak. And with interest rates falling, there was also a large increase in the net number who said it was a good time to get a mortgage on their home.

Key Highlights

• How is consumer anxiety tracking? The NAB Consumer Anxiety Index fell for the second straight quarter in Q2 2019. Overall, the Index fell 1.4 points over the quarter to 54.4 points – it’s lowest read since Q1 2018 (51.6 points). The index was also noticeably lower than at the same time last year (58.8 points) and continued to track well below average (59.6 points).
• What’s driving consumer anxiety? Post the 2019 federal election, the index was led down by lower anxiety arising from government policy (down 2.8 points to 58.0). Anxiety over the cost of living also moderated (down 1.8 points to 62.4). Living costs are however still the single biggest driver of overall anxiety with almost 1 in 4 consumers rating their anxiety over their living costs ‘very high’. Consumers were less anxious about their health (down 2.2 points to 52.4) and ability to fund retirement (down 1.0 points to 56.1). But with the unemployment rate ticking up, anxiety around job security increased further (up 0.6 points 42.9).
• Which groups fared best and worst? Anxiety varied widely across our 58 monitored groups (expanded from 53 to include home duties and people aged 50-64 and 65+). It was highest for house and apartment renters, men aged 30-49 and 50-64, people earning less than $35,000 p.a. or $75-$100,000 p.a. and labourers. It was lowest for the over 65s (men and women), widows, people who own and live in an apartment, or earn $100,000+ p.a. Consumers in NSW joined TAS as the most anxious, and those in VIC joined SA/NT as the least anxious. Anxiety was similar for men and women. By age, 30-49 year olds were the most anxious and over 65s the least anxious.
• Is the economy playing a role? Despite the Q1 national accounts confirming a third weak quarter of growth, the level of concern consumers had about the general domestic economic situation in Australia and how it was impacting on their future spending and savings plans moderated further in Q2 2019 (down 3.2 points to 57.5) (60.7 points in Q1 2019). Consumer concern over the general global economic situation also waned (down 1.9 points to 57.7). These results suggest that while many indicators tracked by economists have continued to soften (or trended sideways), they are typically not how everyday consumers gauge the economic environment.
• What’s happened to incomes? In net terms, the overall number of consumers who said their level of household income decreased in the last 3 months outweighed the number of consumers who said it increased. However, the net number who said it fell improved to -6% (-8% in Q1). Looking ahead, the number expecting their incomes to rise in the next 12 months exceeds those expecting it to fall (+18%). Men are more optimistic about their future incomes than women in all age groups.
• What about savings? Many Australian consumers are still struggling to save. In net terms, the overall number who said their level of household savings decreased in the last 3 months outweighed the number who said it increased. However, the net number who said it fell improved to -15% (-22% in Q1). Savings fell in all groups by age and gender, except women aged 18-29. Looking ahead, the net number expecting their savings to rise in the next 12 months exceeds those who expect it to fall (+4%). Consumers aged 18-29 (both women and men) are by far the most optimistic about their savings, and women and men over 65 by far the least optimistic.
• What about debt? In net terms, the overall number of consumers who said their level of household debt decreased in the last 3 months outweighed the number of consumers who said it increased. Moreover, the net number who said it decreased improved to -8% (-5% in Q1). Household debt levels decreased in all groups by gender and age. Looking ahead, more consumers expect their household debt levels to decrease than rise in the next 12 months (-20%), with consumers more optimistic in all age groups.
• Have spending behaviours changed? Spending behaviours were slightly less conservative in Q2, with NAB’s overall spending indicator improving to -9 (-10 in Q1). Consumer caution was most evident when spending on non-essentials, particularly eating out, entertainment, major household items and personal goods. The net number of consumers who increased their spending on essential goods and services also fell a little, but continues to be dominated by spending on utilities and transport. Consumers also remain largely conservative about making major purchases in the next 12 months.
• Is it a good time to buy, sell or take out a property loan? Consumer are still overall quite bearish about the market. On balance, more consumers indicated it was a good time to buy a property to live in and to renovate their home. More consumers also said it wasn’t a good time to sell their home or investment property. And with rates falling, there was also a large increase in the net number who said it was a good time to get a mortgage on their home.
• Will it be a good time to buy sell or take out a property loan in the next 12 months? On balance, slightly more consumers said it will be a good time to buy a property to live in in the next 12 months. The number of consumers who don’t think will be a good time to sell their home or investment property also continues to out-weigh those who think it is. These results suggest many consumers still think the housing downturn could still have more to run.

For further information, please download the NAB Consumer Anxiety Report Q2 2019