Australian economy 2022 recession fears as consumer confidence crashes to its lowest since 1991
Australian families now have grave fears for the future with consumer confidence plunging to its lowest level since 1991’s crippling recession, new data has revealed.
Aussies fear the economy is on the verge of a major crash, with just 10 per cent thinking there will be ‘good times’ ahead in the next five years.
The doom and gloom outlook is the worst on record since the ANZ Roy Morgan Consumer Confidence survey began.
Australian families now have grave fears for the future with consumer confidence plunging to its lowest level since 1991’s crippling recession, new data has revealed
The survey also recorded its biggest week-on-week drop in 30 years, outside of the pandemic, against a background of rising inflation and interest rates.
Overall consumer confidence plummeted 7.6 per cent to 80.6 points in just seven days – down almost 30 points on a year ago – after the Reserve Bank increased interest rates by 50 basis points to 0.85 per cent.
Only figures in the darkest moments of Covid spreading across the world in April 2020 have been worse.
Those numbers quickly rebounded when an exit route out of the pandemic emerged and hope returned.
But now Australians see only a bleak future as the delayed impact of Covid spending, global inflationary pressures and the Russian war on Ukraine smash the nation.
Aussies fear the economy is on the verge of a major crash, with just 10 per cent thinking there will be ‘good times’ ahead in the next five years
Inflation is tipped to hit six or seven per cent by the end of the year and interest rates are expected to soar to at least 2.5 per cent within months.
The Ukraine war has seen fuel and power bills spiral, while the disastrous La Nina floods that smashed Australia’s east coast have sent food prices soaring.
Now economists are warning a ‘dire state of sentiment’ is spreading across the country as families see no short-term solutions to the looming crisis.
‘Outside of the pandemic, consumer confidence hasn’t been this low since January 1991, the midst of the early 1990s recession,’ said David Plank, ANZ Head of Australian Economics.
Almost twice as many people said they were now worse off than they were compared to last year against those who said they were better off.
And around three-quarters didn’t think they will be any better off this time next year, with almost 40 per cent expecting ‘bad times’ in the year ahead.
Nearly half of all those interviewed thought it was currently a terrible time to buy a major household items while less than a quarter disagreed.
The doom and gloom outlook is the worst on record since the ANZ Roy Morgan Consumer Confidence survey began
But Mr Plank said consumer spending had so far still held firm although there was growing concern families will be forced to tighten their belts.
‘So far this year household spending has been resilient despite the softness in consumer confidence.,’ he added.
‘The RBA, for one, will be looking closely to see whether this divergence can continue.’
The Australian stock market continued to fall on Wednesday after a massive 3.6 per cent plunge to close at a 16-month low on Tuesday.
And the Australian dollar is also at a five-week low against the US, buying 69.10 US cents, down from 69.54 US cents at Tuesday’s close.
The study comes out as the Fair Work Commission announced a dramatic 5.2 per cent increase in the minimum wage on Wednesday, and 4.6 per cent for award wages.
‘There has also been a sharp rise in the cost of living since last year’s review,’ admitted FWC president Iain Ross.
‘The outlook for inflation is also materially higher than envisaged three months ago.
‘Headline inflation is now expected to peak at around six per cent in the second half of this year, partly driven by higher petrol prices and sharp increases in the cost of new dwellings.’
He added: ‘The present circumstances warrant an approach which gives a greater level of support to the low paid while seeking to contain inflationary pressures.’
The announcement was welcomed by unions boss Sally McManus who said it will allow the low paid to keep pace with rising costs.
The study comes out as the Fair Work Commission announced a dramatic 5.2 per cent increase in the minimum wage on Wednesday, and 4.6 per cent for award wages
‘It means that for low paid workers will have a better ability to pay the rent and to pay for the groceries and to pay for energy bills as well,’ she said.
‘It’s going to make a big difference for so many workers.’
She added: ‘We don’t know what is going to happen into the future in terms of inflation, whether it’s a spike that will quickly come off, or whether it’s going to be something that continues longer than a year.’
But the pay rise for millions of Aussies is likely to be passed on to families as businesses struggle to find the cash, warned Andrew McKellar, CEO of the Australian Chamber of Commerce.
‘It comes at a time when inflation is emerging as one of the most urgent challenges facing the Australian economy,’ he said.
‘If we are to address that, if we are to remain competitive, then clearly this is not a decision that will help in those circumstances.’