Australian households are concerned about their finances as weak wages and salary growth lead to a juggling act between spending and saving or reducing household debt. The Westpac-Melbourne Institute consumer sentiment index barely rose in February, recording a 0.1 increase to 99.7. Any reading below 100 indicates the number of consumers who are pessimistic is more than the number of consumers who are optimistic.
Westpac chief economist Bill Evans was concerned by the results. He found a “disturbing lift in risk aversion amongst Australian households. Compounding this result is a sharp fall in how respondents assess their own finances. Our research highlights a direct link between these factors and consumer spending.” Consumption accounts for around two-thirds of GDP and is thus the largest component. Any change in consumption patterns tends to have noticeable effects on the overall economy. He also thinks the households will carry their worries into 2018. “This concern is unlikely to fade in 2018 appropriately constraining household spending and discouraging investment.”
