Consumer confidence crashes in Sydney as Covid-19 lockdown bites

While consumer confidence is being smashed in NSW, it’s so far been more than offset by a rebound in optimism in Victoria and WA.

The mood in Sydney has darkened as a result of the city’s lockdown, and is likely to grow darker still. Picture: Getty Images

Sydney’s lockdown has smashed consumer confidence in the country’s biggest city, with worse to come, even as surging optimism among Victorians and West Australians helped to lift the overall national mood in July.

Westpac’s consumer sentiment survey, conducted early this month, shows a 1.5 per cent rebound in the national confidence gauge to 109 points, leaving it still well above average.

This was despite a 10 per cent drop in NSW to 105, and a 14 per cent plunge in the gauge in Sydney to 108 – also still higher than the longer-term trend.

As residents of Sydney and its surrounds braced for a further two weeks of restrictions following news of another 97 daily cases, Westpac chief economist Bill Evans warned “confidence in Sydney and NSW could fall significantly further if lockdown measures are unsuccessful or slow to act in containing the outbreak”.

“It seems likely that at the time of the survey many respondents may have been expecting a shorter lockdown period than is now being mooted,” Mr Evans said.

Offsetting the growing pessimism in NSW was a 12 per cent lift in the sentiment measure in Victoria to 102, and a 15 per cent jump in WA to 98.

A reading above 100 indicates more optimists than pessimists among respondents.

Mr Evans said the good news was that “concerns around the current virus outbreak and associated restrictions in NSW are not spilling over to the rest of the country”.

“This contrasts with Victoria’s ‘second wave’ outbreak in August last year which weighed heavily on sentiment across the country.”

PwC chief economist Jeremy Thorpe said the lift in confidence outside NSW suggested “people have become almost confident that if we shut the borders, then we are going to be fine”.

 

As fears grow that the Sydney lockdown will send the national economy backwards in the September quarter, labour force data on Thursday will reveal whether Melbourne’s two-week shutdown, and the associated border closures, slowed the pace of jobs growth in June. The consensus among private sector forecasters was for unemployment to remain steady at 5.1 per cent, with an additional 20,000 jobs created in the month.

Mr Thorpe said the momentum leading into the latest setback should be sufficient to keep the recovery on track, but that “confidence is key” for the longer-term outlook, and that job security remained the pre-eminent concern for households.

The PwC economist said there was a “good chance” unemployment would tick lower to 4.9 per cent in June.

NAB economists on Wednesday maintained their view that the jobless rate would drop to 4.8 per cent by the end of the year, although that estimate could be threatened by a “material” extension to the Sydney lockdown.

Mr Thorpe, who has done extensive analysis on the impact of the pandemic on the CBDs, said Google mobility data showed Victorian office workers were even more reluctant to return to their desks after the recent restrictions in Melbourne were eased.

“There may be less economic scarring coming out of these lockdowns, but there could be more ‘physical’ scarring as mobility does not bounce back,” he warned.