Consumer confidence in ‘disturbing’ record slump: Westpac

Consumer confidence has suffered its biggest plunge on record, falling to levels not seen since the ‘recession we had to have’, Westpac reports.

Bare toilet paper shelves in a Sydney supermarket late last month. Picture: AAP

Consumer confidence has suffered a historic collapse in April, with Westpac’s monthly sentiment gauge plunging the most in its 47-year history to around levels last seen during the recessions of the 1980s and 1990s.

The Westpac-Melbourne Institute index fell 18 per cent to 75.6 in April, from 91.9 in March, tracing the extraordinary spread of the coronavirus around the world and the ramping up of social isolation measures to control the rate of new infections in Australia and abroad.

Consumers are now almost as gloomy as they were during the deep recession of the early 1990s, when the index reached as low as 64.6 points, and as pessimistic as they were during the downturn a decade before that.

While still shy of previous recessionary depths, the pace of the fall in consumer confidence has eclipsed anything seen before.

Westpac chief economist Bill Evans described the results as “very disturbing”, and noted that “the lows in previous recessions were reached after one to two years of continuous deterioration compared to the one month collapse we have seen here”.

“Certainly we cannot rule out the index dropping below the historic low of 64.6 we saw in November 1990,” he said.

All sub-components of the index, which track households’ views on their finances and the economy, as well as their views on whether it was the right time to make a major household purchase, fell.

Confidence in the economy over the next 12 months dropped by a “spectacular” 31 per cent - also a record - to 53.7 points. That is near the low of 53.2 points during the GFC, but still shy of recessions in the early 1990s (34.2pts) and 1980s (42.1pts).

Overnight, the IMF warned that the global health emergency had triggered a “crisis like no other” and forecast the worst year for the world economy since the 1930s Great Depression.

But the international body also predicted a rebound in 2021, suggesting that the contraction will be sharp, but relatively short.

The Westpac survey showed that Australians remain relatively optimistic about a rebound, with the “economy in the next five years” subindex down just 3.8 per cent in the month to 87, still “comfortably above recent cyclical lows”, Mr Evans said.

“We suspect the relatively resilient medium term view on the economy reflects the expectation that virus disruptions will be temporary, whereas respondents were unable to envisage the sequence of events that would rescue the Australian economy in the 1980s and 1990s recessions.”

As bad as the survey was, Mr Evans said “it could well have been worse” had the spread of COVID-19 not been as well contained, and were it not for the government’s unprecedented fiscal support package.

“Despite the bleak and threatening backdrop, Australia’s pandemic experience to date has been much less debilitating than that of the hardest hit areas abroad, Mr Evans said.

“The number of cases is high but has not overwhelmed Australia’s health system, with recent evidence showing a clear slowing in new cases that indicates policy measures are working to contain the spread.”