Christmas looks like mixed bag for South Australians
As Christmas approaches a respected survey reveals consumers are pessimistic but corporations are confident.
Recent BankSA research shows cost-of-living pressures are weighing heavily on households, but businesses are preparing to increase investment and make major purchases.
The Bank’s quarterly survey, known as State Monitor, reveals consumer confidence has plunged to its lowest level since early days of the pandemic.
In the approach to Christmas there’s been a 19% decline in the number of respondents making a major purchase – for example on real estate, cars, whitegoods, electronics or travel – than there were three months ago.
And there’s been an 11% fall in the number of respondents who indicated they were considering a major purchase in the next three months.
The big picture
The big picture also represents a mixed bag. The International Monetary Fund (IMF) forecasts that although inflation in most countries is going down, Australia’s will remain high.
The IMF further predicts Australia’s consumer price index, now hovering around 2.8, will be 3.6 by the end of next year.
By then the IMF expects it to be the country with the second highest inflation among 41 countries.
The dubious honour of top inflator goes to Slovakia in central Europe where inflation by the end of 2025 is forecast to hit 4.8%.
The IMF predicts that by the end of next year inflation will be 2% or less in the UK, US and Canada.
Stephen Smith, a Deloitte Access Economics Partner, says a main reason Australia lags in the international race to lower inflation, is that the global inflationary surge was upon it later than other countries, and it’s therefore taken Australia longer to stem the tide.
“Furthermore, our country in the past financial year spent quite a lot of money on energy rebates which has been putting downward pressure on inflation, so that if as expected those rebates stop next year, then it’s likely there could even be a small spike in Australia’s inflation.”
Certainly, the Reserve Bank of Australia (RBA) appears in no hurry to lower interest rates.
Concern about the outlook
The unemployment rate in the latter part of this year has stabilised at around 4% in Australia and indications are the labour market will remain tight.
This and other factors Macks Advisory has canvassed in recent months have sparked national concern about economic growth, already at its lowest pace since the early 1990s.
Globally outlook signs aren’t encouraging. Prominent among these is deterioration of China’s economy now facing what Deloitte’s Stephen Smith says are “significant structural challenges”.
Factors contributing to a downgrade of Australia’s housing market are a further concern. The federal government has made much of its target of 1.2m dwelling completions in the next five years, but current estimates suggest there will be less than a million commencements in this time.
Consequently, economic growth this year and next is expected to be stunted, and there’s no sign productivity will improve.
Stephen Smith says flatly the nation’s economy is not dynamic enough to maintain growth.
“Increasingly it’s being driven by public sector as opposed to private sector activity. Of course, public sector jobs in care, particularly in health and education, are important, but generally they’re less productive than jobs in the private sector.”
Macks Advisory is confident its concern the economy is depending too significantly on the fact that almost one in three workers is government-employed, is a worry widely shared.
Turnaround in business outlook
Yet, concurrent with consumers’ declining confidence in the past six months, the latest BankSA State Monitor survey reveals growing confidence among larger corporations.
Back in June this had slumped by 8.1 percentage points to 82.9 percentage points (where 100 is neutral) but has since increased12% -- indicated by respondents who say they intend to undertake major investments in their businesses in the next 12 months.
Which means the gap between consumer and business sentiment is the widest it’s been in the 27-year history of the survey.
BankSA business state general manager David Firth says this is because of an ever-diverging outlook between business owners and consumers.
On one hand he refers to positive signs among significant businesses of willingness to conclude there is much to be confident about in Australia – this despite government inadequacies in economic management, assorted global headwinds, and 27.7% of owner respondents admitting their productivity is declining.
On the other hand, he points out that polling indicates Australians are increasingly concerned by how the soaring cost of living is making life difficult for them now, while also hazarding their future.
June was the 11th consecutive quarter of SA confidence being below the neutral level of 100 stretching back to December three years ago and the state’s Business Expectation Profitability Index languishes in negative territory, recently falling a further 2.6 points to 76.4 – the lowest level since the peak of the Covid pandemic four years ago.
Is it any wonder there is widespread speculation about PM Anthony Albanese calling an election well before it’s due next May before things get any worse for voters -- struggling business owners and financially stressed consumers?
