Home buyer sentiment at 34-year low as spending rises

Home buyer sentiment has dropped to its weakest level since September 1989 when the standard variable mortgage rates were at 17 per cent, with the “time to buy a dwelling” index falling 11 per cent to an “extreme low” of 65.7.

Furthermore, Westpac-Melbourne Institute Consumer Sentiment remained unchanged at 78.5 in March, making it the second consecutive month of “extremely weak” consumer sentiment, according to Westpac chief economist Bill Evans.

“Index reads below 80 are rare, back-to-back reads even rarer,” Mr Evans said.

“Runs of sub-80 reads have only been seen during the late 1980s/early 1990s recession and in the ‘banana republic’ period of concern in 1986, when the Australian dollar was in free-fall after the Federal government lost its triple-A rating.”

Mr Evans noted that both the “COVID-19 shock” and global financial crisis only saw one month of sentiment at these levels.

Data from the ANZ-Roy Morgan Consumer Confidence index revealed a drop of 2.9 points to 77.0 as of 14 March 2023, which was the lowest rating since early April 2020 during the infancy of the pandemic, according to ANZ-Roy Morgan data.

Further findings revealed that sentiment regarding the Australian economy in the long-term remains weak, with only 11 per cent (down 1ppts) of Australians expecting “good times” for the economy in the next five years, while 20 per cent (up 3ppts) expected “bad times”.

Speaking at the recent AMP webinar, chief economist Shane Oliver said: “We’ve got very low levels of consumer confidence … and it remains extremely weak.

“Today (13 March 2023) it was about 78 which is a level normally associated with recession. Australian consumers were also asked if it was a good time to buy a house and the number was 65 (points) which is well below the normal 100.

“People are still sceptical about buying houses (even though someone must be because prices have stabilised a little bit lately).”

Household spending rises

Despite the low consumer confidence, the latest Australian Bureau of Statistics (ABS) household spending indicator data for January 2023 has revealed that household spending rose 17.8 per cent in January when compared to the same period last year.

According to ABS head of business indicators, Robert Ewing, the increases were led by spending on transport, which rose 41.5 per cent; hotels, cafes, and restaurants (up 38.5 per cent); and clothing and footwear (20.9 per cent).

In comparison to pre-pandemic data from January 2020, spending on services increased 13.8 per cent and goods spending rose 23.7 per cent.

“Spending on services recorded a 28.2 per cent through-the-year increase in January 2023, which was stronger than the 8.6 per cent rise in goods spending,” Mr Ewing said.

“This can be credited to the post-COVID-19 recovery in spending categories such as transport, hotels, cafes and restaurants and recreation and culture.  

“Spending on these services was more affected by COVID-19 restrictions, and 2022 has seen a recovery to a more normal share of total spending. From the low point in April 2020, spending on services has risen 145.5 per cent compared to 35.8 per cent for goods.”

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