Daily Commentary BY THE CURVE TEAM –

Consumer Confidence at Mid GFC Levels

Wednesday 24th June 2020

The ANZ-Roy Morgan Survey out yesterday showed consumers are concerned over the short-term outlook.

The headline survey number for confidence held steady for the week, but its 97.5 index level sits us at a confidence level akin to the early month of 2009 midway through the GFC.

As the economy is experiencing such a large an unexpected shock, consumers are understandably concerned about their finances and the economic outlook over the short term. Finances compared to a year ago printed at a 87.4 level, down a further 1.5 points over last week and bringing the recent decline to 30pts since mid-March. That in itself isn’t surprising, with job security low as a result of the recent lockdown.

The interesting component of the survey was the longer-term outlook. Whilst economic conditions and finance compared to last year and the year ahead show consumers have concerns, the financial outlook for households over the medium term are positive. Economic conditions 5 years ahead printing at 105.8, the highest reading since November last year.

The question from the survey is, if consumers truly believe that conditions will be positive over the medium term, how does the economy get there? Growth globally is likely to be lacklustre for some time, with many of our trading partners still in the midst of the virus. Similarly, volatility in asset prices is unlikely to substantially reduce in the short term with so much uncertainty over the outlook. The hope from the survey may very well be with the government seeming to be taking positive steps towards structural reform and there may actually be some gains to productivity in the medium term.

In the political vein, after a few months where partisan brinksmanship seemed to wane, it did appear to be coming back. However, reports out overnight indicated one key issue of contention between the two parties which may come to a resolution. Energy policy has been arguably one of the most polarising issues for the nation over recent times but it also has potential to be a key driver of economic growth. If the two parties can come to an agreement whereby business has access to cheap and sustainable power, there would be a significant upside to the viability of local manufacturing.

Matthew Dunshea

Client Relationship Manager