Australia has entered a prolonged period of economic distrust that is hampering recovery efforts despite improving underlying indicators, according to new analysis from Roy Morgan Research.

The data shows that distrust in the economy has persisted since the COVID-19 pandemic, creating a self-reinforcing cycle that is limiting consumer spending and business investment.

Before the pandemic, Australians trusted the economy more than they distrusted it, but COVID-19 marked a decisive tipping point that plunged the nation into sustained net distrust territory.

Roy Morgan CEO Michele Levine identified two critical insights: the pandemic exposed and amplified existing weaknesses in institutional trust, permanently altering how Australians judge institutions, brands, and leaders, while a distrusting public becomes inherently risk-averse, spending less and saving more.

The ANZ-Roy Morgan Weekly Consumer Confidence index has remained well below the neutral 100 mark for over three consecutive years, representing the longest and deepest stretch experienced this century.

As of May 2025, consumer confidence stood at just 87.9, with the index not reaching positive territory above 100 since March 2022.

“Low confidence isn’t just a mood swing; it feeds a self-reinforcing cycle in which households pull back on discretionary spending, businesses delay new investments or hiring, and government revenues come under pressure,” the research noted.

The negative sentiment persists despite falling inflation and interest rates, suggesting that psychological factors are now driving economic behaviour more than traditional economic indicators.

The data reveals a concerning rise in Buy-Now-Pay-Later usage, with 24.5% of Australian adults now relying on BNPL services at least once annually, and 15.9% using them monthly.

This represents almost a 10% increase over the past year, indicating growing financial stress among consumers who are turning to credit products to manage everyday expenses.

Nine Network National Finance Editor Chris Kohler highlighted additional concerns about BNPL expansion, noting that merchant fees of approximately 4% are significantly higher than credit or debit card charges, creating additional costs for businesses.

“The expansion and growth in BNPL is costing money to the economy in a few different ways,” Kohler explained, as small businesses absorb these costs or pass them on to consumers.

The distrust phenomenon acts as a “hidden brake” on economic recovery, with Australians remaining wary of the very institutions they rely on, including banks, governments, and retailers.

Even as traditional economic indicators improve, this institutional skepticism prevents the release of consumer spending that typically drives economic momentum.

Despite positive signs, including falling interest rates, improving retail spending, growing business confidence, and controlled inflation, the psychological barriers to economic recovery remain substantial.

Kohler suggested that sustained improvements in job security and continued interest rate cuts may eventually restore consumer confidence, potentially around Christmas 2025.

The research indicates that Australia has become a “fragile nation” where sustained stress on the social fabric is affecting economic behaviour.

The combination of low confidence, rising personal debt through BNPL services, and persistent institutional distrust creates challenges for policymakers seeking to stimulate economic growth through traditional monetary and fiscal measures.

The findings suggest that economic recovery in Australia requires not just improved financial conditions but also a restoration of trust in institutions and confidence in the economic system’s ability to deliver sustained prosperity for ordinary Australians.