Given that consumer confidence was already in the doldrums on the lead up to, and just after Christmas, it is little surprise that we note that one of the largest natural disasters in Australian history has given it a good kick while it is down.
The Queensland floods have knocked the stuffing out of consumer confidence, obliterating the usual post-Christmas bounce and pointing to fragile spending as authorities attempt to come to grips with managing the economy.
The proportion of Australians agreeing that ”now is a good time to buy a major household item” nearly always jumps in January, often by 10 per cent.
This January, for only the third time since records have been kept, the proportion fell, negating the effect of the January sales.
Advertisement: Story continues below The Westpac Melbourne Institute consumer sentiment survey was conducted in the second week of January as the floods hit Toowoomba and Brisbane.
In Queensland, the overall measure of confidence fell 6 per cent; in the rest of the nation it fell 3 per cent.
Optimism about economic conditions over the coming year slid 16 per cent and expectations about personal finances 6 per cent.
Only when asked about economic conditions five years out was sentiment unchanged, with pessimism about the long-term outweighing optimism.
But let’s be clear about this; confidence was already falling long before the flood because it was becoming obvious to many businesses and households that their financial position was not looking as good as it used. Debt issuance contagion was starting to effect the real economy.
However blaming the flooding for poor economic data, responsible or not, is probably a trend we are going to have to put up with for some time yet; especially in Queensland where we expect the government to use it to wash away the sins of years of economic and political ineptitude.
That is of course unless you listen to the flog, who never need worry about facts, can see a “boom” even in the most obviously horrible circumstances, and have all sorts of wonderful theories. Today’s seems to be broken window theory.
ICAP Securities economist Adam Carr said spending would boom in the wake of the floods regardless of consumer confidence.
It’s January and people are not going to sit around and wait until the middle of the year to start rebuilding their lives.
That would depend if they have a choice about that now wouldn’t it Mr Carr?
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