Border restrictions following the onset of emerging coronavirus clusters in various states has dented confidence in the Australian economy, which has gradually been recovering from the virus ordeal that plagued 2020.
The latest Westpac-Melbourne Institute consumer sentiment index fell 4.5 per cent to a position of 107 in January from 112 in the previous month, largely highlighting the impact domestic border closures have had on consumer confidence.
Westpac chief economist Bill Evans said a fall in the index was expected, but it still remained in a healthier position than when previous virus outbreaks dented sentiment.
“Since the last survey in the second week of December we have seen domestic border closures, the emergence of COVID clusters in some states and the sharp upswing in COVID cases overseas, notably the US and the UK,” Mr Evans said.
“This result compares to the 15 per cent fall that was registered over July and August last year as the nation was shocked by Victoria’s severe second wave and associated hard lockdown.”
The leading economic indicator also recorded an 8.3 per cent fall in the 12-month outlook to an index position of 102.7, while the five-year outlook dropped 4.5 per cent to an index position of 115.6.
Despite the slump, the survey found overall consumers were more optimistic about the future of the economy.
Mr Evans also noted consumers surveyed were less positive about their financial positions, and intentions of spending on major household items had waned.
“Respondents were also less positive about their finances,” he said.
“The component ‘family finances relative to a year ago’ fell by 7 per cent, while the ‘12-month outlook for family finances’ was steady, falling by only 0.3 per cent.”
Westpac’s findings also recorded dents in confidence within labour market conditions, with the survey’s unemployment expectations index rising 11.9 per cent, signalling there is a greater concern that consumers are facing the prospect of being jobless.
Mr Evans said the increase in the prospect of unemployment was still lower than levels recorded in November 2020.
“However, the index is still 6 per cent below its level in November, 11 per cent below its level a year ago and, excluding last month, is at its lowest level for nearly 10 years,” he said.
“This month’s survey continues to point to solid employment conditions.”