Are Australians sulking because someone took away the punch bowl and we are feeling poorer? Our sense of entitlement has somehow been upset and we don’t know who’s to blame, but we have our suspects, as we show each month in the polls of sentiment. Those monthly surveys of consumer confidence are part of the problem, such as the latest from Westpac and the Melbourne Institute, which showed only a small improvement this month, something that the commentariat took to be “disappointing”.
The survey of 1200 people showed its index of consumer sentiment rose 0.3 in June to 95.6, adding only marginally to May’s modest 0.8 rise. “This is another disappointing result,” said Westpac chief economist Bill Evans. “Clearly other factors are dominating rates in the minds of consumers — those factors are concerns about the domestic economy and international conditions.” Evans, of course, is part of the problem, being from Westpac, which with the CBA and the NAB swallowed part of last week’s 0.25% rate cut from the Reserve Bank.
Sentiment remains 1.7 points below the October 2011 level despite the 1.25% in four rate cuts since then. But the standard mortgage rate has only dropped by about 1%, and banks, led by Westpac, have snaffled the rest for their profit margins. “Clearly other factors are dominating rates in the minds of consumers — those factors are concerns about the domestic economy and international conditions,” said Evans.
And yet these same people seem confident enough to buy new cars in near record numbers, travel overseas in near record numbers and buy products from the internet here and offshore in growing quantities. And yet we are managing to consume at fairly high levels, while saving at 9-10% a year, and have been doing so for five years as we deliver and rebuild our finances.
Judging by the low levels of consumer confidence, the incessant negativity of politics, especially federal and very particularly, from Opposition Leader Tony Abbott and his band of merry pranksters, the answer would be that this feeling in Australia that things are crook and the outlook is bad, is not misplaced. Someone is to blame, Canberra, foreigners, the banks, business, the unions? You name it, the host of candidates is as long as you want it to be. And yet when you look at the economy and what is going on, you find that the people who took away the punch bowl are the same people who are negative and moaning: they are voters, ordinary Australians who have decided to save more than they have done in a decade, spend their money differently, using the internet or shopping when retailers have sales (which gives consumers greater control and bang for their buck).
Mainstream media doesn’t help, nor do economists and other commentators who routinely grab the “rate rise looms/rate cut loom” angle on daily economic data, or who ignore the majority of Australians without home loan mortgages and push the interests of the one third of the population who do (and more than half those are paying their home loans off faster than they have to), or fail to recognise the life that people who live on fixed incomes or savings. The strains on their lives are made much tougher with every rate cut for those with home loans, most of which are not underwater (unlike in America).
Last Friday and this morning, RBA governor Glenn Stevens has given essentially the same speech. Today’s was to Julia Gillard’s talk fest in Brisbane. Last Friday’s speech in Adelaide, titled The Glass Half Full contained some interesting insights, the most important being on the question of confidence. The bottom line is that the lack of confidence and the gloom are linked to the fact that house prices have stopped rising and the decade of madcap consumption is over.
And he made it clear the Reserve Bank has no interest in re-igniting confidence to make us feel good again.
“One thing we should not do, in my judgement, is to try to engineer a return to the boom. Many people say that we need more ‘confidence’ in the economy among both households and businesses. We do, but it has to be the right sort of confidence. The kind of confidence based on nothing more than expectations of ever-increasing housing prices, with the associated willingness to continue increasing leverage, on the assumption that this is a sure way to wealth, would not be the right kind. Unfortunately, we have been rather too prone to that misplaced optimism on occasion.”
So we will go on moaning ands groaning about how terrible times are, to any pollster, shock jock or compliant politician (who should know better), when we just don’t know how well-off we are.
Things are pretty miserable when it takes a technocrat such as the RBA governor to make a reasoned and (for him) fairly impassioned appeal to Australians to recognise that they live not in interesting times, but are living quite well and have the capacity to take and sustain tough decisions.