Aussie household confidence takes another dive

From Martin North at Digital Finance Analytics:

After the slight twitch of positive sentiment following the election in May, the DFA Household Finance Confidence Index fell again, to a new low of 85.54.

Whilst the RBA rate cut may offer some borrowers the prospect of improved cash flow (when the changes propagate through to the regular repayment), just as many households bemoan the continued cuts in savings rates. So, net, net there is no improvement in financial outcomes, and in fact more are concerned that lower RBA rates signals more trouble ahead.

Across the states, WA showed a significant slide in confidence thanks in part to rising mortgage default and delinquencies, and very high underemployment. Most other states are bunched together, whereas a year or two back, VIC and NSW were streets ahead.

By age, younger households with mortgage debt registered a small improvement, while older households with savings went the other way on lower bank term deposit rates. Many of these will simply hunker down, and spend less, and will not largely benefit from the upcoming tax cuts. Older households resist the temptation to move to higher risk alternative savings vehicles, they too just spend less.

The property segmentation reveals that property inactive and investor households both reported lower levels of confidence, while owner occupied home owners were slightly more positive on the rate cuts news.

All three of our wealth segments remain below neutral on the index, indicating a significant deterioration over the past couple of years. Even those with property and no mortgage remain below the neutral 100 setting.

Within the moving parts of the index, job insecurity increased, with 37.4% reported as less secure than a year back, up 0.64% on the previous month. Around half of households saw no change, though underemployment continues to push higher.

Savings continue to take a battering with more households dipping into them to secure their budgets, and lower returns on bank deposits – especially term deposits. On the other hand, share portfolio holders are fairing a little better – though with higher risks of course. Over 52% are less comfortable than a year ago.

In terms of the debt burden nearly half are less comfortable, despite the rate cuts, while 48% are about the same as a year ago – down 1.46% on last month.

In terms of costs of living, the pain continues, with 91% saying their costs, in real terms are higher than a year ago. Only 1.33% said their costs of living had fallen. Households specifically mentioned higher council rates, fuel costs, electricity, school fees and child care costs.

Income remains under pressure, with 4% saying their incomes had increased in real terms in the past year, compared with 50% saying their real incomes had fallen. 41% said their incomes were about the same.

And overall net worth (assets less loans) rose for 23% of households – thanks to higher share prices mainly, while 47% reported a fall in net worth – thanks to property price falls, and reduced savings. 27% reported no change. As yet any recovery in home prices has not fed through into more positive results.

So, more evidence of the pressure on households, and so far the measures taken by the RBA and the Government have had no net positive impact on household confidence. As noted above, even those with property and no mortgage remain below the neutral 100 setting.

As a reminder this data comes from our rolling 52,000 household surveys, with 1,000 new added each week. This is data up to Monday 8th July.


  1. Maybe the penny is starting to drop with the average Australian?

    They are realising we don’t produce much of value to the rest of the world. That their work is precarious and there is always the threat of work being offshored or wages undermined by New Arrivals.

    Perhaps it’s dawning on them that all these New Australians aren’t actually helping the economy along and all there is is a big pile of debt and no future.

    • We export resources. A solid business with massive benefits rights across the economy.

      • True. But most people who living in the major population centres are so removed from this industry. And one day, the resources will run out and then what?

        We should have established a Development Fund like Norway with the mining revenue, perhaps a Medical Research Fund for internationally leading research with developments and products we can export to the rest of the world.

      • Most people think they’re removed from it but that cash flows right through the entire economy like you wouldn’t believe. Completely agree about the sovereign wealth fund.

    • You make is sound as though the ‘average Australian’ is a victim here, whereas they are complicit, if not collaborators in the malaise the now riddles our economy.

      Who borrowed mountains of debt to ‘invest’ in non-productive housing assets? Who derided STEM education for ‘mining jobs’? Who gleefully championed on the unions whilst they eroded our productivity by demanding more wages for the same output as workers in third world countries? Who voted in govts with no clear policies for our economy over the last 20yrs? Who lets our mining industry sell raw product with zero-value add?

      There are no victims here, only consequences of selfish, short-sighted action and/or inaction.

    • scottb1978MEMBER

      It’s going to take a couple of generations for the penny to drop. Property is in the blood of the nation.

  2. Jumping jack flash

    another 0.25% cut to the cash rate, part of which is passed onto those with stonkingly huge, economy-crushing mountains of nonproductive debt attached to them should fix things. No doubt.

    That first cut was just to improve confidence that cash rate cuts could improve the economy. The second cut (and subsequent) is where all the action is!

    Hang in there peeps. Not long now and we’ll all get payrises, and there’ll be tens of thousands of new fulltime positions to choose from.
    Any minute now.

    Hark! I think my boss approaches with good tidings!
    Alas… was naught but tumbleweeds and crickets.

    • I’d take tumbleweeds and crickets over having my boss approach with a notice of redundancy – which is what faces a large chunk of our workforce over the next two years!

  3. C.M.BurnsMEMBER

    that last slide is the killer and explains the ongoing crush in retail (our second largest employer). Since July 2017 the year-on-year net worth of this survey’s participants has been decreasing.

  4. Martin’s just asking the wrong questions here. Ask them their confidence in the property market and purchasing intentions of such………to the moon! Just have to ask the right questions.