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Consumer confidence continues to build despite COVID, protests, earthquake

Australian consumers are feeling more confident about their financial positions despite a flurry of troubling headlines in the past week, but inflation fears could derail our new-found optimism.
Australian consumers are feeling more confident about their financial positions despite a flurry of troubling headlines in the past week, but inflation fears could derail our new-found optimism. Last week saw the number of active COVID cases climb to 19,944 and bring the number of Australians hospitalised by the virus to almost 1500 – predominantly in NSW. Victoria, which had the second-highest number of hospitalisations, also faced several days of violent protests as anti-lockdown and anti-vaccine rioters clashed with police in a series of skirmishes. Those altercations culminated in a stand-off at the Shrine of Remembrance only a few hours after a magnitude 5.8 earthquake violently shook the Victorian capital awake. But this onslaught of worrisome headlines wasn’t enough to quash a modest improvement in the nation’s consumer confidence. Data from ANZ and research house Roy Morgan found consumer confidence lifted 0.4% during the otherwise chaotic seven-day stretch to eke out its third consecutive week of modest improvements. Both Western Australia and South Australia recorded noticeable improvements in confidence, which more than made up for declines in Queensland, regional NSW and Melbourne.
“Given the circumstances, sentiment in Melbourne held up quite well with a decline of just 0.9%,” ANZ head of Australian economics David Plank said.
“Confidence remained practically unchanged in Sydney with a rise of just 0.1% as daily cases started to descend.” The data, however, came with a warning. Consumers’ weekly inflation expectations rose to 4.8%, lifting the four-week moving average to 4.7% – the highest level since 2014, not long after ANZ and Roy Morgan began collecting weekly inflation expectation data. Mr Plank cautioned that high inflation expectations at a time of weak wage growth could weigh on consumer confidence as Australians begin to worry about their living costs. Wages in the public sector recorded their lowest annual growth rate since 1997 in June this year, ticking up only 1.3% during the previous 12 months. Private sector wages did slightly better, lifting 1.9% during that period. On a quarterly basis, wages across the private and public sectors grew only 0.4% during the three months ending June 2021, which ABS head of price statistics Michelle Marquardt noted was “one of the lowest rates recorded”. “Apart from a few isolated examples of skills shortages placing pressure on employers to meet expected market rates, the private sector wage growth recorded over the quarter (0.5%) was generally subdued,” she said. “Public sector wages rose by 0.4% for the third consecutive quarter, dampened by ongoing negotiations around new enterprise agreements and the postponement of scheduled wage rises.”
Sources:

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