Despite a modest lift coming into the new year, Westpac’s latest survey shows that Australian consumer confidence is “still depressingly low”.
Westpac’s January survey shows a five per cent lift in the bank’s sentiment index to 84 points. A ‘neutral’ confidence level is 100 points.
While this five per cent jump marks the largest monthly leap since April 2021, it also finds January confidence in the bottom 10 per cent of observations since the mid-1970s.
In fact, Westpac chief economist Bill Evans put this mainly down to the lack of an RBA January meeting, and therefore another interest rate rise.
“One likely explanation for the lift in confidence is that January was the first month since April last year that did not see an increase in the RBA cash rate,” Evans said.
“If so, we should be cautious about reading the January sentiment rise as part of a continuing trend.
“The January read is in the bottom 10 per cent of observations since the mid-1970s. We have to go all the way back to the depths of the deep recession in the early 1990s to find a period where Index reads were consistently below those seen over the last six months, including the improved print in January.”
Evans isn’t expecting things to lift any time soon.
“As we move through 2023, we expect inflation pressures to ease, slowly boosting confidence although it is likely to remain well below par during the year,” he said.
“Multiple legacies from the pandemic that boosted spending in 2022 despite weak confidence – including the reopening surge, a large, accumulated pool of excess household savings and the extremely tight labour market – will also fade in 2023.
“Consumer spending is expected to fall back into line with the below-par confidence reads, which we expect to persist through the year.”
