Do we like troubled times?

I follow the key Roy Morgan economic data sets as a useful counterpoint to ABS data. The Roy Morgan database is very large and their data generally raw so it can be useful in pinpoint turning points.

In that vein, RM yesterday released consumer confidence and unemployment numbers for October, which show a much stronger divergence than we’ve seen in the Westpac and ABS numbers. First up, unemployment:

As you can see, the Roy Morgan data is more volatile (it is not seasonally adjusted) than the ABS Labour Force survey but is a useful analog in trend terms. There’s not much mistaking it’s current direction. Indeed, the index has broken out of a range that effectively bound it since early 2007:

In October Australia’s total unemployment as measured by Roy Morgan was 1,026,000 (8.6%), up 107,000 (0.9%) from September 2011 and up 266,000 (up 2.2%) since October 2010 – Australia’s highest unemployment rate since March 2004 (8.8%). It is also the highest number of unemployed Australians for nearly a decade – since January 2002 (1,075,000).

I had a chat to Michelle Levine, CEO at RM, and she had an interesting take on the recent jump, putting it down to two main factors. The first is a slowing of flood reconstruction activity in Northern NSW and Southern QLD. Both areas showed a sharp rise in unemployment in the recent survey, especially amongst men. The second reason is that school leavers, who might usually see this period as a bit of time off, are instead looking to find work as soon as possible, driven by the uncertainty of the times.

Yet, contradicting the rise is the second survey: consumer confidence:

As, you can there is also a clear breakout with a pretty decent trend:

Consumer Confidence rose to 116.8pts, (up 2.1pts in a week – its highest since May 7/8, 2011) according to the Roy Morgan Consumer Confidence Rating conducted last weekend (October 29/30, 2011). Consumer Confidence is now 11pts lower than a year ago, October 30/31, 2010 (127.8).

This week’s rise in Consumer Confidence has been driven by increasing confidence amongst Australians about Economic conditions in Australia over the next year and also in buying major household items.

About Australia’s economy over the next twelve months, 36% (up 4%) expect Australia will have ‘good times’ financially during the next twelve months (the highest since May 28/29, 2011) compared to 28% (down 5%) that say we’ll have ‘bad times’ (the lowest since May 21/22, 2011).

An increasing majority of Australians 58% (up 3%) say ‘now is a good time to buy’ major household items compared to 18% (down 1%) that say now is a ‘bad time to buy’.

Now 31% (unchanged) of Australians say their family is ‘better off’ financially than a year ago compared to 31% (up 1%) that say their family is ‘worse off’ financially than a year ago.

According to Levine, the research is showing three reasons for the jump (which is more consistent than the Westpac survey). First and foremost, recent discussion and delivery of rate cuts. Secondly, and paradoxically, recent global strife has reinforced a sense that Australia is an island of stability and prosperity. Third, there is a large a growing divergence in confidence between Labor supporters and LNP supporters. Confidence is rising for both but the recent successful passing of the carbon tax bill and diminishing of divisive debate has Labor voters feeling chipper.

My own take is that we like troubled times because they deliver rate cuts and ease up the mortgage. In short, our indebtedness has led to a rather perverse outlook.

David Llewellyn-Smith
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  1. I reckon it is part of the national character that we manage tough times better than we manage good times.

    We like to be backs to the wall, fighting under great adversity, and we do it well.

    If things get too easy and we have reason to celebrate, we don’t have the sense to stop drinking til after we fall over.

    • I think you’re a bit optimistic! My feeling is that we’ve completely forgotten what tough times are and we’re going to hate it when they make an appearance.

      • I agree we have forgotten what ‘hard times’ are. Forget about the 30s, 40s and 50s – even more moderate challenges like interest rates at near 17% in the 1989/90 are a distant memory or not even known of!

        I reckon at the moment for most of us it is like watching a scary movie or a thriller, going on a gut-churning theme park ride, indulging in extreme sports, participating in a triathalon (never did understand that one!) – frightening/challenging gets the adrenalin pumping…and then it’s over. Revives our fight or flight instinct, gives a buzz – but essentially we control it. It seems a basic human need, keeps our senses honed and prevents falling into somnambulist middle class existence. A predetermined timeframe selected by the participant and totally enjoyed. Here in Australia we feel the buzz of global economic doom humming through the airways, can speculate and play “what if”, but essentially feel somewhat removed from it – a little bit of adrenalin but not an overload.

        And you are right, if genuine economic hard times came along, catastrophic events beyond our control in every way and for an undetermined period any dallying with the thought of enjoying hard times will vanish.

        “The world economy is on the edge of a precipice. The best we can hope for now is a managed retreat from the wilder shores of globalisation. The alternative is the collapse of the euro, protectionism – and even war.”

        via HenryThornton

        • darklydrawlMEMBER

          Yes, exactly. I personally know folks who lost several properties and businesses in the early 90’s when things in Oz turned nasty on the economic front.

          On the other hand, I work with kids who think that ‘hard times’ means a lesser xmas bonus than last year – that is ‘doin’ it tough’ to them. Personally I feel that they have some serious pain coming up.

          My Mum and Dad, who lived through some hard times, will cope much better than these kids I suspect, despite my parents lack of income and options compared with some of these people.

          • To be fair, with higher debt levels, a smaller xmas bonus may really be doing it tough these days. I don’t think most people can survive very long without a job. It could mean that when hard times hit, they will hit hard as people will have no buffer against losing their income.

            Of course, how these high debt levels came about is another story and more their fault.

          • The RBA makes it very hard to link directly to their graphs – I’m referring to the “Household finances” one.

        • 17% interest rates a distant memory?
          Baby Boomers still can’t stop bleating about them when pontificating to younger generations about housing affordibility,even though 17% interest rates incurred a lesser debt burden than 4.75% interest rates do now.

          You must be unaware of reality if you think the children of poor parents, who have studied for a degree and have recently enteredt the workplace.

          HECS debt, rent and cost of utilities are placing quite a degree of hardship on them.

          • RP and AB – fair point on the interest rates, I had not considered that – although I recall stories at the time of homeowners handing the keys to the banks, unable to service the mortgage (I was not in the property market at that time and those stories may be little more than urban myth).

            However, RB, average weekly earning in 1990 were around $550 and in 2011, around $1300. My own son is still at school so no advice on rates to him yet, but when discussion at work or social events turns to rates, I can assure you there are a lot of younger property owners that have no idea that rates were once 17%. Your parents may have served you well!

          • Interest rates will never be 17% again – so what our parents experienced is moot.

            The RBA sets the interest rates based on the tolerance of the countries inhabitants to the rate rise. Its aim is to change behaviour, and if a lower rate gives the same behaviour as a higher rate did back then well that will become the new ceiling to the rate. i.e its a policy that really only has a great effect due to the indebtness of most of the population.

        • My grandparents were scarred by the Great Depression, and I grew up knowing about that and learning from it.

          Whereas kids born in the late 80s, early 90s, who are reaching homebuyer age now, their grandparents grew up in the post war boom times. So it’s quite conceivable that no first-hand experience of genuine hard times has been related to them.

    • Pre-kids, not too far off the mark H&H, but not for a long time now.
      But I reckon it’s not a bad analogy for the nation. Not original by any means, but not bad.

    • darklydrawlMEMBER

      Whilst there is opportunity in chaos, there is also chaos in chaos. Keep in mind plenty of folks get sucked down the rabbit hole when things tank badly, often through no fault of their own.

      Whilst some folks are clearly roadkill, there are others who do everything right and still get burnt pretty badly.

      Keep in mind that many of the folks working today were babies when the last nasty recession hit Australia and have NO concept of hard times at all. It has all been good times and champers for all for their entire careers and fin planning models.

      I suspect many of them will panic myself, when they realise that, this time, they really are screwed.

      That said, if you are LUCKY and prudent, you may have the chance to gain from others’ losses.

      Planning plans a big part, but so does plain random luck.

      • “Whilst some folks are clearly roadkill, there are others who do everything right and still get burnt pretty badly.”

        This my friend is called life.

        As silly as this might sound, life is like a poker game. You are dealt the cards and have to make the most of it while you can. Over time, when playing 1000’s of hands you can do everything right and still get burnt by some lucky bugger who manages to win with a 2%-5% draw. Sometimes in poker you just get really lucky and you ride the wave of success as if its all your own hard work. (sound familiar, last 20 years in property?). But in the end its the true grinders who win, the ones who work hard and play making level headed decisions always taking probability into consideration. These grinders are successful in the long run.

        Just like a property developer, the good ones are always around even through the bad times.

        With regards to troubled times, some people in poker enjoy playing as the short stack, every move has to be calculated and you have to pick your spots. Same as when we are successful, the chip leader in poker can sometimes strike out in 4-5 hands, they let success get to their head and throw it all away.

        In the end putting Australia into the poker analogy I think we have just come off a good run, with the mineral boom to cover our ass’s its been a long time since we have “experienced a bad beat”. When this happens a lot of people will be financially hurt.

      • its not so much gaining from others losses DD more putting yourself in position to sieze opportunities that others either cant see or cant take advantage of themselves. if you want to be buying when things are bad you need to be selling when things are good. this brings its own risks and doesnt suit some people who like to ride out the cycle. those that do that arent necesarily “losing” when things get bad.

  2. I reckon Swanny and treasurey like troubled times as they will be able to say, look we could have got back to surplus in 2013 but things were so crook in the rest of the world, and although we have the worlds best treasurer and the most amazing economy we are not immune from the rest of the world

    • I think you’re right there Jack. And that is a good political answer.

      Factually wrong but a good answer.

  3. I’m not sure how you arrived at it but I more or less agree with your conclusion.

    Unemployment is rising (years ago I plotted ABS vs. RM & the largest % diff was 1.6%, I figure it is much bigger now) and consumer confidence is volatile between rising and having it’s lowest sentiment since the GFC.

    I note in the ?RBS? retail data that inflation is increasing because people are eating out.

    I think it must be our perverse outlook that says things are about to go to hell in a handbasket, let’s get some last good times in whilst we can (including buying item/s we’ve always wanted) all before it goes rapidly down hill.

  4. ceteris paribus

    Our feelings of economic security are so relative. Net worth millionaires can agonize about their finances while the peniless can own the world. It is all illusory.

    If there is any such thing as objective economic security, however, even the poorest Australians have hit the jackpot.

    Honour to those speical spirits who make precious little more than enough, at least for NOW and now and now.

  5. The rising consumer confidence just goes to show how stupid were really are. The MSM is full of ‘times are tough’ stories quoting struggling families yet these are probably the same people who’ve just gone off and bought a new 1568″ plasma, a jet ski but cry hard done by because they couldn’t get the matching his and hers SS Commodores. Our own stupidity will be our undoing.