Australians are paying off debt rather than splurging at the shops

Getty Images.

Australians felt a lot more confident in early 2016, with anxiety levels falling to a multi-year low according to new research released today.

The National Australia Bank’s (NAB) consumer anxiety index slid 0.7 points to 60.4, leaving the index well below its long-run average of 61.8. At the present level, it indicates that anxiety levels haven’t been this low since the June quarter 2013 – just before the nation went to the polls to oust the Labor government.

According to the NAB, “lower anxiety was underpinned by diminished concerns over retirement funding, health expenditure and cost of living pressures”.

Job security remained the area of least concern for consumers, fitting with strong labour market conditions in the second half of last year.

Adding to evidence that recent indecision in Canberra is adding to anxiety levels, the NAB note that “government policy has joined cost of living as the joint biggest contributor to overall consumer anxiety”.

“Almost 27% of Australians rating their anxiety associated with government policy as high,” said the bank.

The chart below, supplied by the NAB, reveals the internal movements in each of the surveys components going back to 2013.


Despite the overall decline in anxiety levels, spending patterns during the quarter continued to be directed towards non-discretionary areas.

The chart below, also from the NAB’s report is telling. All one has to look at is the components where consumers spent more on compared to where they cut back.


Though the vast majority indicated that they were cutting back spending on discretionary items, the NAB notes that “it remains notably stronger than at the same time last year across most spending categories, and in all states bar Tasmania”.

The improvement — albeit small — is shown in the radar chart below. Though fewer respondents indicated they were spending less on discretionary items than a year earlier, the numbers increased from the previous quarter despite reduced anxiety levels.


Despite continuing the trend of the “cautious consumer”, Alan Oster, chief economist at the NAB, remains optimistic on the outlook for spending.

“Consumers are telling us they’re less anxious about the state of the world, but they continue to be focused on paying off debt and essential items like utilities, transport and groceries,” he said following the release of the quarterly report.

“Improvements in the labour market have helped consumer spending gain momentum since late last year. We continue to expect moderate growth in consumer spending throughout 2016.”

Here are some of the other key findings to come from the report.

  • Women continue to be much more anxious than men, particularly in the 30-49 age bracket.
  • On a state-by-state basis anxiety remains lowest in the non-mining states, whilst consumers in SA/NT and WA recorded higher stress related to government policy, cost of living and job security (particularly in WA).
  • Financing retirement, providing for the family’s future and health expenses continue to be the main drivers of household financial stress – but are creating less financial stress than at the same time last year.
  • Low income earners remain the most anxious group in Australia. But, middle income earners ($50,000-$100,000) were the only income groups to rate anxiety higher, with government, health and cost of living the main drivers.
  • Labourers reported the biggest increase in stress levels across all groups, with heightened concern across all anxiety questions, especially in relation to their job security.