Growth, inflation and labour market all easing
Consumer anxiety reaches its highest level in over 3 years as slow income growth, high debt levels and weaker growth in household wealth weighed on households and their spending.
• Consumer anxiety rose to its highest level in over 3 years in Q4.
• Funding retirement is the biggest financial worry.
• Australians reporting “financial hardship” at its highest in 2 years.
• Higher consumer anxiety has spilt through to actual spending.
NAB’s Consumer Anxiety Index rose to 62.0 points in Q4 in the December quarter (its highest level in over 3 years), as slow income growth, high debt levels and weaker growth in household wealth weighed on households and their spending.
NAB Chief Economist Alan Oster said “Anxiety increased most over the cost of living, and despite a healthy labour market, concerns over job security also climbed to its highest level since mid-2016”.
In terms of household finances, retirement remains the big worry, followed by providing for the family’s future, raising $2,000 for an emergency, and medical/healthcare costs.
“Against this background, almost 4 in 10 Australians said they had experienced some form of financial hardship in Q4 – the highest in 2 years”, said Mr. Oster. Being unable to pay a bill remains the most common cause of hardship. “Utility bills impacted the financial position of almost 1 in 2 households in hardship”, said Alan.
Low pensions/other benefits also overtook insufficient savings as the next biggest issue. Other issues that had an impact for around 1 in 5 consumers included grocery bills, rental payments and low wages. Noticeably more women, 18-29 year olds and low income earning consumers said they suffered some form of hardship than in the previous quarter.
Higher levels of consumer anxiety also appear to have spilt through to their actual spending. Consumer caution was most apparent when spending on ‘non-essentials’. This mainly reflected a sharp rise in the net number of consumers that said they had cut back on travel, eating out, charitable donations, entertainment and home improvements.Spending on ‘essentials’ is still being mainly driven by utilities, but less so than in the previous quarter.
Consumers were also more conservative about their expectations in regards to making a major purchase in the next 12 months, with their intention to spend pared back across all types of major purchases.
“The biggest change was in regards to holidays and travel. If this happens Australians will be spending much less on holidays in 2019” said Mr. Oster.
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