Consumer confidence ‘roars back’ in September, Westpac-Melbourne Institute data shows

Australians’ confidence has rebounded as households shrug off the recession and Victorian infections are brought under control.

Consumer confidence rebounded in September after its dramatic falls in the prior month. Picture: NCA NewsWire / Steven Saphore

Consumer confidence roared back in September after the previous month’s collapse, as households shrugged off the confirmation of Australia’s first recession in decades as “old news”.

The Westpac-Melbourne Institute index of consumer confidence bounced 18 per cent in September to 94 points, after dropping by a sharp 10 per cent in August.

This month’s recovery pulled the sentiment gauge to just 2 per cent shy of the six-month average before the arrival of the COVID-19 pandemic in March.

A reading of 100 reflects a neutral balance between optimists and pessimists, and the long-term average of the index is 101.3.

New daily virus cases trended lower over the first week of September when the survey was conducted, and Westpac chief economist Bill Evans said he had expected a recovery in this month’s survey but was still “pleasantly surprised” by the strength of the rebound.

“It comes despite official confirmation in the survey week that Australia had experienced its first recession since 1992,” Mr Evans said. “Clearly this was ‘old news’, with respondents more focused on the future.”

There was even a 15 per cent surge in consumer confidence in Victoria, although the survey was done before the weekend’s extension of restrictions, and the state’s consumers remain markedly more pessimistic than elsewhere in the country.

A collapse in consumption was almost single-handedly responsible for the largest economic contraction on record over the three months to June, highlighting the importance of household confidence and spending in driving the post-COVID recovery. The lift in consumer spirits matched an improved – if still dour – mood among businesses in August as the second wave of virus cases showed signs of abating through the month.

NSW consumers are now as confident as they were in June, when hopes were high that the country had suppressed the virus faster than expected and the economy was reopening. The Queensland sentiment gauge is 2 per cent above June levels, while Western Australia is 11 per cent higher. In contrast, Victoria remains 6 per cent below its June level.

When looking at the subindices, it was apparent that there was “still extreme nervousness” among households about the economy in the short term, Mr Evans said.

The “economy in the next 12 months” subindex increased 41 per cent in September but remained 18 per cent below where it was a year ago.

In contrast, households’ sentiment towards their actual and prospective financial situation was running above pre-COVID levels, which analysts said reflected the unprecedented level of government income support provided through the health crisis.

Nonetheless, Australians remained cautious about major spending, with the “time to buy a major household item” subindex lifting by 16.3 per cent to be still 12.1 per cent below the levels of a year ago.