It might surprise after the year we’ve just had, but sentiment among consumers is actually up 14.6 per cent on a year ago – before most Australians had even heard of COVID-19 and endured their first recession in almost three decades.
Despite a mild pullback in January as authorities tightened restrictions locally following COVID clusters in some states, the Westpac Melbourne Institute Index of Consumer Sentiment is sitting at 107, a further 2 per cent above October levels and firmly in optimistic territory.
Positive vaccine news and the easing of COVID restrictions in the second half of last year, along with the economy’s better than expected recovery, have now driven a remarkable 41.5 per cent rebound in sentiment from the April low.
That said, there’s been some wobbles around the turn of the year following virus clusters, brief lockdowns in Brisbane and parts of Sydney, and border closures. Just this week, Perth and surrounding areas have also gone into a five-day lockdown.
But as our latest Red Book shows, the relatively mild knock to sentiment so far highlights two points:
First, we will probably continue to see sporadic disruptions from local COVID outbreaks for some time yet; and second, despite this, confidence looks to be on a much firmer footing and resilient to these disruptive developments.
Indeed, the finer detail in our survey continues to show a robust, broad-based rally – across states, sub-groups and almost all aspects of sentiment. Consumer spending is already showing a sharp reopening rebound after surging since mid-last year, and we now expect spending to regain its pre-COVID level by around mid-2021. As our Westpac Card Tracker Index reveals, spending has been more choppy through January but continues to hold at positive levels, and at 106.9 means annual growth in credit and debit card activity is still running nearly above its pre-COVID pace.
Further buoying consumers’ spirits, the housing market continues to rebound, prices last month hitting record highs.
Of course, many challenges and uncertainties lie ahead, notably the virus continuing to overwhelm many countries abroad.
But for now at least, it’s clear Australian consumers have turned the corner on the COVID-19 pandemic shock.
The information in this article is general information only, it does not constitute any recommendation or advice; it has been prepared without taking into account your personal objectives, financial situation or needs and you should consider its appropriateness with regard to these factors before acting on it. Any taxation position described is a general statement and should only be used as a guide. It does not constitute tax advice and is based on current tax laws and our interpretation. Your individual situation may differ and you should seek independent professional tax advice. You should also consider obtaining personalised advice from a professional financial adviser before making any financial decisions in relation to the matters discussed.