The weekly ANZ-Roy Morgan consumer confidence rating fell by 7.6 per cent – the biggest drop since March 2020 – to a 15-month low of 97.9 points. It was the weakest January consumer sentiment reading since 1992.
According to preliminary data from the Australian Bureau of Statistics (ABS), there were 197,000 overseas arrivals to Australia and 229,000 overseas departures from Australia in December, the highest volumes since international border restrictions were imposed in March 2020.
What does it all mean?
Consumer confidence, as measured by ANZ and Roy Morgan, plunged by 7.6 per cent – the biggest fall since March 2020 – to a 15-month low of 97.9 points last week. In fact, ANZ economists reported, “Consumer confidence readings are usually positive during the month of January and the level of 97.9 is the weakest January result since 1992.
Sentiment has slumped due to the rapid spread of the highly contagious Covid-19 Omicron virus variant over the summer as Aussies adjust to “living with the virus.” In fact, new Covid-19 infections have hit record highs following the easing of government restrictions.
Commonwealth Bank (CBA) Group economists estimate, based on government figures, that national daily new Covid-19 case numbers have surged to around 65,000 infections in seven-day moving average terms. Changes in the reporting of cases by health officials, including the transition from PCR to rapid antigen tests, however, are likely to have understated actual case numbers, with health system operators coming under extreme pressure.
Covid-19 isolation requirements are having a huge impact on the Aussie economy, and in particular, the labour force and supply chains. CBA Group economists estimate that close to one million people nationally are likely to be in isolation due to being a close contact or being infected. Of course, infected workers have little choice but to stay at home, while some high-frequency indicators (such as Google Mobility data) suggest that many workers are in a self-imposed lockdown, particularly in the hardest-hit cities of Sydney and Melbourne, as case numbers explode. A lack of workers has strained supply chains, particularly in the food sector, with shelves threadbare in some supermarkets.
All five key consumer sentiment sub-indexes of consumer views on the economy and personal finances dropped last week, with 19 per cent of respondents expecting to be “worse off” financially this time next year, the most since September 2020. And consumer views on whether it is a good ‘Time to buy a major household item’ declined by a massive 11.4 per cent last week, falling to its lowest level since late August 2020.
According to CBA Group economists, “Our internal credit and debit card data indicates spending has dropped sharply on services over the past few weeks (last data to 14 January). Spending on goods, however, has held up well. There is always a high degree of volatility around spending over the Christmas / New Year period. But our assessment at this stage based on our internal data is that the surge in COVID cases over the past three weeks has resulted in ~3 per cent less spending over the period than would otherwise have been the case. This is not a bad result considering the huge number of people that have been required to stay at home.”
The ANZ-Roy Morgan measure of consumer inflation expectations over the next two years was unchanged at 4.9 per cent last week, a smidgen below the 7-year high (since December 7, 2014). Cost of living worries are ‘front-of-mind’ for Aussie households with the Australian Institute of Petroleum yesterday reporting that the national average unleaded petrol price rose by 5.9 cents last week to a 12-week high of 167.1 cents a litre. The Brent crude oil price hit the highest level in seven years in trading today. And utilities bills, insurance renewals and school fees loom large for households in the coming weeks.
Overall, the strong economic rebound from last year’s Delta virus lockdowns in Australia’s south-east is being dampened by the nation’s Omicron virus outbreak. Demand for services has eased, weighing on the recovery, while supply-chains are buckling under worker absenteeism. With a peak in new cases not expected for several weeks, production, hours worked and consumption will all take a hit in the March quarter. But CBA Group economists expect unemployment to remain low, with likely targeted business support payments by governments, cushioning the disruption to economic activity. Economic growth, as measured by GDP, of 1.0 per cent is now forecast in the March quarter, downwardly revised from our pre-Omicron outbreak estimate of 2.3 per cent.
Provisional overseas and arrivals data was released by the Bureau of Statistics (ABS) today, after international border restrictions for fully Covid-19 vaccinated Aussies were eased in November. According to the ABS, there were 197,000 overseas arrivals and 229,000 overseas departures in December, the most since border restrictions were imposed in March 2020 at the start of the pandemic.
What do you need to know?
Consumer sentiment – Week ended January 16
The weekly ANZ-Roy Morgan consumer confidence rating fell by 7.6 per cent – the biggest drop since March 2020 – to a 15-month low of 97.9 points (long-run average since 1990 is 112.4).
All five major sub-components fell last week.
Overseas arrivals & departures – November (detailed) and December (provisional)
According to preliminary data from the Bureau of Statistics (ABS), there were 197,000 overseas arrivals to Australia and 229,000 overseas departures from Australia in December, the highest volumes since March 2020.
Detailed data from November was also released. There were 72,250 total arrivals in November, up by 56,510 trips. And a total of 20,860 short-term overseas arrivals were recorded in November, with Singapore accounting for 15 per cent or 3,170 of all visitor arrivals.
A total of 25,890 short-term trips overseas were recorded by Aussie residents in November, up by 21,130 trips. The US was the most popular destination country, accounting for 14 per cent or 3,670 of all resident returns.
Total departures stood at 91,100 in November, up by 54,290 trips.
In November, there were just 770 international student arrivals, down by 98 per cent when compared to pre-Covid levels in November 2019.
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