Not happy, ScoMo. Inside the head of the Aussie consumer

From Westpac’s marvelous Red Book:

The Westpac–Melbourne Institute Consumer Sentiment Index declined 4% over the three months to July, taking the Index to 96.5, a two year low.

― The fall is troubling given the context, coming despite several positives including interest rate cuts; income tax relief; reduced political uncertainty following the Federal election; and signs that the Sydney and Melbourne property markets are stabilising.

― The component detail shows the decline centred around expectations for the economy and the outlook for family finances, with sharp falls in these subindexes partially off set by a modest gain in assessments of current conditions.

― Risk aversion eased slightly but remains near historical highs. The Westpac Risk Aversion Index edged down slightly to 45 from 49 in March and 51 in December. The Index is still well above the long run average of 14.7.

― CSI± our modified sentiment indicator that we favour as a guide to actual consumer spending, has been better supported, rising 1.5% between May and July. However, it was coming from a much weaker starting point than the headline sentiment index, and at 89.8 remains over 12pts below its long run average of 102.4. As such the signal is still consistent with falling per capita consumer spending. Partial data and business surveys suggest spending remained weak in Q2.

― Consumer attitudes towards major purchases have also been better supported, the ‘time to buy a major item’ sub-index down only 4%yr. However, actual spending on ‘big ticket’ items has weakened sharply over the last year, suggesting other factors such as budget pressures, and reduced access to finance are over-riding buyer sentiment when it comes to purchase decisions.

― Housing-related sentiment continues to show a clearer positive response to lower interest rates and other policy developments, both ‘time to buy’ and house price expectations recording strong increases.

― The ‘time to buy a dwelling’ index lifted a further 3.2% over the 3mths to July, the month marking the fi rst above average read in 4½ years. The index has now risen 36.8% from its mid-2017 low, NSW and Vic continuing to show the biggest turnaround.

― The Westpac-Melbourne Institute Consumer House Price Expectations Index has posted an even bigger surge jumping 33.5% between May and July. At 119.4, the Index is at its highest level since May last year but still below the long run average of 126. The level looks to be broadly consistent with stable prices.

― Consumer confidence in the labour market has deteriorated significantly since May the Westpac-Melbourne Institute Unemployment Expectations Index jumping 11.2% over the June-July (recall that higher reads mean more consumers expect unemployment to rise in the year ahead). At 134.4, the Index is materially above its long run average of 130 for the first time since September 2017 implying consumers expect a moderate rise in the unemployment rate over the next 12mths.

And one last one for good measure:

Looks like consumers no likee ScoMo or ZIRP. Perhaps it’s time for some fiscal!

David Llewellyn-Smith
Latest posts by David Llewellyn-Smith (see all)


  1. Sentiment down, unemployment up, time to buy a major item down. Overall it looks like things are turning to sh1t in multiple domains, so house price expectations are up. WTF? The country is full of idiots, lunatics, both….

    • Torchwood1979

      Explanation for that is easy – this Government is hell bent on keeping wages low but will throw everything including the kitchen sink at housing.

      • BubbleyMEMBER

        How these morons can’t see that rising wages equals higher housing prices completely evades me.

      • Torchwood1979

        @Bubbley, they know rising real wages equals house price rises but they only want the latter. Basically we have a Government that is either oblivious to or happy to take a chance on the growing systemic risk that comes from an increasing wage / debt gap.

  2. This current batch of vibrants are not doing what ScoFry intended them to do i.e. pick up the retail and property slack from debt-enslaved locals.

    (Allow me a quiet chuckle to myself as this patently absurd bit of economic ‘policy’ starts to fail miserably in front of our collective eyes)

    • Who would have thought importing people from cultures where they love doing things on the cheap, wouldn’t translate to lots of retail transactions!

      But now we are stuck with them, with their shiny legally or illegally obtained shiny Medicare cards. And then they will want their pensions after being here for a relatively short time, whilst sending how much of that pension money overseas in remittance.

      Who could have predicated this?

    • Their lack of any marketable skill should also have been a warning. I’ll never forget the uber driver telling me he was about to purchase a house for approx $900k. I then asked him what other work he did besides uber thinking it was a side gig to make some extra cash, turns out it was his actual job. He’ll be fine becuase he is following the solid advice from the gov’t.

      • robert2013MEMBER

        I’m willing to bet that if the housing market really does go south then there will be a lot of debt that can’t be recovered as the mortgagee flees overseas to their country of origin to escape the debt. Imagine Australian businesses trying to recover debt through Indian or Chinese courts.

    • for new immigrants to spend they have to get a job first. if economy is not coughing up jobs then there is no spending – only longer lines at centre link.

  3. In general I don’t spend any money on things that aren’t absolutely essential. Why should I? I’m past the stage of consuming mindlessly. I don’t earn much, can’t work full time though I’m lucky to work to my full capacity, and my basic material needs are taken care of to a level that satisfies me. I’m not exposed to the consume to be validated messages of mass media; they’re super easy to avoid these days. I save everything for either a house deposit (at some stage I’ll be able to afford something, somewhere but until then I’ll save like crazy) and for investment (some select shares for medium to long term time frames). If I spend $20 a week on discretionary spending its a big week for me. I’m probably atypical but I have a feeling I’m also not that unusual these days. I just can’t be bothered spending money, it doesn’t spark joy 😉

    • I’m much the same. I have pretty much everything I need, why pointlessly spend money on acquiring things? Beyond being comfortable, things don’t make you happy. Good health, friends, family, and a good relationship are all much more important than a big TV or a new car.

      In a couple of months time I’m going to walk the WW1 battlefield in France where my grandfather won his gong. For me, that’s been a lifelong ambition, and something that will be far more satisfying and memorable than any new thing could ever be.

      • Good health is my major challenge, however within the limitations of that challenge I do very very well so I’m not complaining. As you get older you realise that the race is long and patience and persistence are key. With them both you can overcome many challenges and a whole lot of bad luck, and or stupidity. There is absolutely no sense in letting life be poisoned by bitterness or regrets. Enjoy your trip to France. Living a meaningful life by your standards is what matters, consumption above what is necessary does not.

    • Urgh. I wish i could. With a small child and another on the way, the lines are blurring on what is a need and what is discretionary. All this “DIY” world with two people working means you end up getting a gadget for every bl00dy thing.
      Gone are the days where you had a village around you to raise a child. Mums idea of sterilising feeding things is “we used to just boil it for 10 mins”. No mum! You didnt boil it for 10mins, you relied on a third world no min wage system that allowed you yo employ maids that hand washed the stuff, boiled it for you for 10 mins and dried it and stacked it back in the cupboards. I need a dishwasher and a steriliser to be able to do this myself now.
      So frustrating hearing of “we didnt need a video monitor back in the day”. Yeah because you could actually watch your kid while the feeding utensiles were being washed, sterlised and dried for you at next to nothing cost.
      I am getting more convinced by the day that this selfie driven digital economy is there to isolate you from a community which then requires you to just buy more things to survive.
      One thing we have stopped spending on is the toys. Buy more books now and focus on things to do like painting or puzzles. I spend more time stacking toys than they are played with. And you get far longer out of spending time with them than playing with the newest plastic thing.

      • It sounds like you and your partner are doing well within the constraints of your circumstances. Having children is not easy and they increase consumption in both a one off and an ongoing sense. I obviously don’t have kids so that means it is far easier for me to keep consumption to a minimum.

      • Divya you have hit the nail right on the head there about the nuclear family society. Community has been removed from the equation, I guess because it didn’t turn a profit.

  4. bolstroodMEMBER

    “I just can’t be bothered spending money, it doesn’t spark joy 😉”
    And there is the rub, the consumer economy myth laid bare.We are societal creatures, we do not live an economy,
    we have an economy , we live in a society…as much as Big Business tries to convince us otherwise.
    ” Good health, friends, family, and a good relationship are all much more important than a big TV or a new car.”
    Thanks LSWCHP

  5. What all these new consumers aren’t consuming like hoped?

    Now we’re stuck with all these gimme gimme new non-hyperconsumers.

  6. Can someone explain how Westpac’s ‘marvellous’ Red Book works? Trying to rationalise the contradiction between charts 27 and 23. Chart 27 tells us sentiment towards real estate for ‘wisest place for savings’ is at 45 year lows yet chart 23 is back at long term averages (and sharply trending up) on the ‘time to buy a dwelling’ front. Are they surveying different groups? Is chart 27 a survey of most of us here at MB and chart 23 a survey of Reusa’s party mates?

  7. This is what happens when you make labour so expensive that you can’t produce exports viably. You have to borrow and import until the taps get turned off. Well done minimum wage.

    • robert2013MEMBER

      Yours is the standard LNP thinking for over 20 years and the solution has been to import labour in massive quantities but it’s the wrong diagnosis. The problem is that the AUD is much too high thanks to highly productive investment in mining relative to the rest of the economy. The solution is either mine less or invest heavily in upskilling. The standard LNP thought though is that Australians are lazy and not very good. Such investment is discouraged because it might not pay off and would entail the creation of genuinely new businesses. This could potentially disrupt the existing social order and undermine the relative position of today’s elite families mainly because they don’t have a clue what sort of businesses might emerge. They might miss the train. Can’t have that now. No, we must be “world class” and implement “world’s best practice” which is code for stifling any genuinely creative endeavours.

      • Too rambling and disconnected to respond to. Some laughable conspiracy theories in there as well.

  8. ScoMo was on the hustings in Port Macquarie prior to the election and he stopped by the latest housing development.

    I can tell you that sales here have flat-lined. Nobody is buying and the tradies who were getting work building houses are trying to make ends meet doing odd-jobs here and there (mostly cashies). My builder neighbour is also a scuba diving instructor and is doing that more than he is building work. He reckons plenty of tradies have left to go to QLD or WA to work in the mines again. None of the smaller builders are taking on apprentices.