Aussies in no mood to spend?
Australian consumers are feeling generally gloomy about the cost of living despite the return of sunnier economic climes. This could tighten their purse strings, a survey by Hall & Partners Open Mind has suggested.
The announcement:
March 7 2011 –
Half of Australians are feeling cost of living pressures and the majority worry things will get much worse, according to new research from Hall & Partners | Open Mind.
“Our research suggests that, given the high level of caution among consumers, things will not change quickly.”
The inaugural Hall & Partners | Open Mind National Mood Index* provides a fresh lens by which to understand the mood of the nation and helps explain why, despite the apparent return of boom times, Australian consumers are reluctant to spend.
The study shows the country’s overall mood is now at a significant low of 35 out of 100, which is greatly at odds with official measures of economic prosperity, such as the Consumer Price Index and employment levels, that suggest a strengthening economy.
Nearly 50 per cent of Australians feel both they and others are being negatively affected by the cost of living, with 68 per cent believing their ability to cover everyday expenses is worse than it was 12 months ago. 78 per cent think cost of living pressures are getting worse generally.**
To shed further light on their perceptions of economic well-being, Australians were asked a series of questions on their rational view of the cost of living (Is it getting better or worse?); their emotional connection to the cost of living (Am I personally affected?); and, their sense of whether they see others being affected (Is my experience the same as others’?).
This probing has revealed five clear “Mood Clusters”:
• The Idealists – who feel that both they and others are being positively affected by the cost of living (13%)
• The Immobilised – who feel that both they and others are being negatively affected by the cost of living (46%)
• The Insulated – who feel that while others are affected negatively, they themselves are fine (22%)
• The Isolated – who feel that while they are being negatively affected, others around them are not (8%)
• The Indifferent – who feel that despite all that is going on, fundamentally not much has changed at all (11%)
“Clearly, the official indicators that Australians are experiencing boom times or only minor shifts in cost of living pressures are not reflected in our research,” said Nicola Hepenstall, Managing Partner, Hall & Partners | Open Mind.
“Not only do many Australians feel that their cost of living is increasing, the majority feel it is getting worse.”
“Against this backdrop, the official economic measures seem markedly out of kilter with actual consumer sentiment – and as everyone knows, perception is reality.”
Ms Hepenstall added that people generally consider mortgage interest rates and rent, which are not measured by the Consumer Price Index, as part of their living costs.
“What people are thinking about when making decisions about their finances is not what official figures, such as the CPI or employment levels, are telling them but ‘How hard is it for me to keep up with my bills’, or ‘How much am I able to spend on entertainment this month?’
“We found people feel very strongly about the topic and have been eager to share their experiences.”
Typical responses included:
• “It is harder every day to try and make ends meet. Prices are going up and what we are getting paid is the same.”
• “Apart from a recent drop in the price of white milk most essential items have increased in price over the last twelve months. Most have been small price rises but a product may have had two or more such rises over the time period.”
• “Utility prices have skyrocketed – my electricity and gas two years ago was maximum of $400 a quarter, now it’s $700 and my income has only increased by $50 a quarter.”
• “The cost of electricity, car registration, mortgage payments and water rates (just some examples) all go up more than any of my pay rises. So every year my ability to cover everyday expenses gets harder and harder.”
Ms Hepenstall continued: “It is a real challenge for retailers to cut through this pessimism, and arguably an even bigger task for Government to balance the competing picture of historically high employment and economic prosperity against perceptions of cost of living pressures in many Australian households.
“There seems to be a fundamental shift in people’s feelings of safety and security. Most ‘experts’ failed to predict the global financial crisis, and people are not ready to trust the ‘official’ view that things are rosy again.
“Another lesson consumers learned from the GFC is that things can change quickly. Accordingly, even if they believe the value of their home is still going up, they are far less inclined to borrow against their home equity.
“The fact that household savings are reportedly at a historic high underscores that caution, and the more people save, the less they have for discretionary purchases.
“This is particularly the case for lower-income households but extends across the economic spectrum.
Source: Hall & Partners Open Mind
