Consumer sentiment for the month of August has fallen to 79.5 from 87.9 in July, a sizeable decrease following the escalation of Victoria’s lockdown to stage 4. While ongoing interstate restrictions on travel and spontaneous viral clusters have played a hand in worsening consumption outcomes, broad-based uncertainty continues to weigh heavily on household spending decisions. This markedly conservative shift in consumer attitudes can be attributed to a number of key fears.
For one, scaled back budgeting to account for cuts to household incomes have reduced consumption on non-essential items including fashion and household items, the hallmark of Australian department store retailers. This precautionary motive has driven an increase in national savings to 19.8%, up from 6% in the previous three months. In addition, prevailing caution continues to preclude higher rates of consumption, as expectations have reflected worrisome signs in our key indicators. Namely, unemployment expectations have hit the highest in more than 6 years, and Australia has entered its first technical recession in more than 29 years following a dismal -7% quarterly growth rate. With consumption, comprising 60% of GDP, continuing to be hampered by widespread pessimism, the economy is in need of renewed firepower come the delayed Federal budget in October.