Australian consumers and businesses are increasingly anxious about the state of the economy, as indicated by recent surveys highlighting deteriorating sentiment and concerns over the job market amidst persistently high interest rates.
A survey conducted by National Australia Bank Ltd. revealed on Tuesday that business confidence plummeted by 5 points to -4 in August, while business conditions—encompassing jobs, sales, and profitability—dropped by 3 points. The employment subcomponent was particularly affected, falling 6 points.
NAB Chief Economist Alan Oster commented on the findings, stating, “Conditions are now clearly below average compared to historical norms, reflecting the broader weakness in the private sector as the economy slows.” He noted that the decline in the employment gauge suggests the robust labor demand observed during the post-COVID period may be waning.
The employment outlook also contributed to a decline in consumer confidence, as reported by a separate Westpac Banking Corp. survey. This survey showed a 0.5% decrease in consumer confidence for September, bringing the index to 84.6 points. This level remains below the neutral 100-point mark, which separates optimism from pessimism, and has done so since March 2022.
“The persistent pessimism over the past two years continues without significant improvement,” noted Matthew Hassan, a senior economist at Westpac. “Although cost-of-living pressures are easing slightly and fears of further interest rate hikes have lessened, there is growing concern about the future economic outlook and its potential impact on employment.”
Recent economic data showed continued weakness in Australia’s economy through the second quarter of the year, as consumers remain cautious. The Reserve Bank of Australia (RBA) maintained its key interest rate at a 12-year high of 4.35% in its last meeting, while keeping a cautious stance due to ongoing inflation concerns.
Despite a jobless rate of 4.2%—still relatively low—the labor market has shown signs of strain, with the unemployment rate rising by half a percentage point over the past five months, reaching its highest level in two and a half years.
Economists and financial markets expect the RBA to keep interest rates unchanged in its upcoming meeting on September 23-24.
Rob Scott, Managing Director and CEO of Wesfarmers Ltd., observed, “Australian households are exercising caution in their spending.” He pointed out that Wesfarmers, which owns retail brands such as Bunnings, Kmart, and Target, is striving to maintain low prices to stimulate sales. Scott also highlighted the pressures faced by businesses, including rising wages, energy costs, domestic transport, utilities, and accommodation expenses.
