Cheap Talk Weighing on Oz Economy

By Glenn Dyer | More Articles by Glenn Dyer

A poll from the ANZ on Tuesday showing sharp fall in consumer confidence was leapt upon by various media and beaten to death in yet another example of how we seem to be talking ourselves into another economic slide.

The ANZ-Roy Morgan survey showed its measure of consumer sentiment slid 7.6% last week to its lowest since October 2020, lower even than during the delta variant surge when much of the country was officially locked down.

Not, however, as low as the early part of 2020 when the Covid Alpha variant first whacked the economy. In fact, the current round of breathless journalism is happening without any regard as to how wrong media and economists were in 2020 about the impact of the first wave of Covid.

But it also has to be said that with this third wave, consumers are markedly warier and opinion polls show they are increasingly upset at government incompetence on issues such as vaccination rollouts, masks, boosters and RATs (Rapid Antigen Tests).

This poll is a rival to long established survey from Westpac and the Melbourne Institute which has a longer history of tracking consumer confidence.

“People are spooked” blathered Guardian Australia, Business Insider said consumer had “closed their wallets” and Reuters had Australian consumers ’shellshocked’ by Covid Omicron.

No doubt there is some truth to this as, led by ScoMo’s administration, most governments are keeping restrictions light and arguing that over-90% vaccination rates can ensure the economy remains open.

However, record numbers of new cases and rising deaths (Especially on Tuesday) have seen households sharply limit their movements and spending on services, while the need for isolation has taken tens thousands of workers out of essential jobs and triggered a shortage of goods and products on supermarket shelves and in other outlets as well as some food types such as meat and chicken.

“We don’t think the economy is as weak as these data might suggest, with the shock of the omicron surge and strains on testing capability the key drivers of the fall rather than underlying economic conditions,” David Plank, ANZ’s head of Australian economics said in commentary.

“But the result highlights that concerns about Covid have the potential to significantly impact the economy if they linger.”

And that was a key qualification – and supported by the reception from the market to the December half trading updates this week from Wesfarmers (for Bunnings, Kmart/Target, Officeworks and its Catch online business, as well as its long held industrial operations which are doing well in booming Western Australia.

Wesfarmers reported big sales slides by Kmart/Target and Officeworks, but solid returns from Bunnings and its other businesses.

Wesfarmers pointed to the impact of the East Coast lockdowns in late 2021 and then the impact of omicron in late December and early 2022, as did electronics and whitegoods retailer, JB Hi Fi which also saw sales and earnings fall because of the lockdowns and then the late impact of omicron.

JB HiFi, on the other hand, did manage to lift sales in its stores over Christmas – New Year which investors found encouraging (see separate story).

The share prices of both companies rose after the updates were released which indicates investors are not concerned too much – but the rises were more relief than anything else.

The ANZ survey was all gloom and doom with measures for respondents’ current financial conditions diving 11.3% and for economic conditions down 7.6%.

The index of whether it was a good time to buy a major household item sank 11.4% to its lowest since August 2020 – which is not what JB Hi Fi found as well its online performance which saw a 66% surge in sales compared to the final half of 2020.

Gareth Aird, the Commonwealth Bank’s head of Australian economics, says the omicron outbreak could shave more than 1% off gross domestic product growth, and cut his forecast for the March quarter to 1.0% from 2.3% previously.

But that is still growth and we won’t know about that until earlyJune when the March quarter data is released and a lot can happen before then – a federal election for example which always has a negative impact on consumer confidence and spending.


About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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