Yesterday we learnt that the number of Australian consumers who were optimistic outnumbered those who were pessimistic, the first time since May this has occurred.
The Westpac-MI consumer sentiment index jumped 3.9% to 101.7. Excluding the budget induced bounce that occurred in May this year – something that was largely result of relief that it was less-harsh on households than its predecessor in the previous year – it was the highest reading recorded since January 2014, some 22 months ago.
On the surface it was a strong result. From a holistic perspective it was a cracker, but upon closer examination there are some concerning trends.
First, it appears that wealthy Australians, rather than those from the lower and middle classes, who drove the headline bounce.
People earning less than $80,000 and the cohort of people aged between 25 and 44 are not feeling confident at all. Quite the reverse.
Here’s a table from the November report that breaks down the change in sentiment levels by annual household income. The section highlighted records the monthly change in each income group.
Clearly, the gains were not broad-based. Sentiment levels among those households earning $80,000-$100,000 jumped by 14.2% to 116.4, slightly shading those earning in excess of $100,000 which rose 12.1% to 110.9. Both groups had scores of over 100, indicating that optimists outnumbered pessimists by some margin.
While confidence levels among wealthy households increased significantly, the opposite was the case for people earning less than $80,000. Not one group below this level recorded an increase in sentiment.
With the exception of those earning between $20,000 to $40,000 per annum, sentiment fell across all other groupings. Significantly, all recorded scores of less than 100, indicating that on balance most remain pessimistic.
There was no discernible reason identified to explain the stark divergence, although it was interesting to note that respondents aged between 25-44 were the only age group to record a decline in sentiment levels, slumping 8.2% to 95.3.
This is the engine room of Australian society: people who are building their careers, starting families, and trying to buy homes.
But this is also the generation of higher education debt, higher house prices and higher cost pressures living a period of elevated unemployment and record-low wages growth.
They are also the spenders – people who, as their careers build, develop earning power (and they still have some energy to spend it). If they’re not feeling confident, that’s going to be a handbrake.
All other groups, particularly for those aged 44 years and older who saw sentiment level jump 11.5% to 103.4, recorded solid increases in sentiment.
One month does not make a trend, but on face value the November survey suggests that middle-income, middle-aged Australians aren’t feeling confident at all.
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