05 Nov CONSUMER CONFIDENCE IS RETURNING

It would appear we are returning to our old selves. Consumer confidence has improved in recent months, reaching the same level as in July 2018 – well before COVID-19 changed our day to day lives.

Westpac’s Consumer Sentiment Index rose by almost 12 percent in October, following an 18 percent in September.

Why are consumers so optimistic ?

The results may come as a surprise to most of us as we hope to see the last of 2020. Westpac’s chief economist has called the turnaround in confidence “extraordinary “. But there are a number of reasons why confidence is returning with plenty of momentum.

Our geographical isolation is working in our favour with cases of the virus well controlled and reducing. While small outbreaks continue to occur, they are quickly contained. Even the problems Victoria have encountered with their second wave is moving in the right direction and looking very promising in recent weeks. As a result , consumers are optimistic that damage from the virus can be contained as governments show strong leadership and our testing and tracking systems seem to be very efficient. In comparison to parts of the northern hemisphere that are plunging into their second and third waves, it’s not surprising that Australia seems to have the control of the spread of the virus well in hand.

Consumers have also had a very positive response to the recent Federal Government budget. Substantial consumer tax cuts and employment incentives have helped Australians feel supported financially. Tax cuts for business , investment incentives and numerous schemes to boost employment and support industry also show government has clear plans to manage and support the economy when and where it’s needed.

The number of employed people increased significantly between May and September, the latest employment figure is still at 6.9%. While this is much higher than normal, it is still better than the dire forecasts of recent months. The extension of government support such as JobKeeper 2021 cushioning some of the concern around employment and income.

The increase in consumer confidence is great news for all sectors of the economy. When consumer confidence is high , people tend to spend more money, which increases demand for goods and services . This allows business to invest, employ more people and increase wages , in turn facilitating more spending.

As we are about to put 2020 behind us , let’s hope we keep the virus under control so that Australia can continue its recovery.