COVID-19 triggers collapse in consumer confidence: Westpac

Victoria’s second COVID-19 wave battle triggers a collapse in consumer confidence across the east coast.

Victoria’s second wave has hit consumer and business confidence. Picture: Mark Stewart

Victoria’s battle to contain the state’s second wave of COVID-19 infections has triggered a collapse in consumer confidence across the country’s entire east coast, with Australians now almost as pessimistic as they were during the peak of the national COVID-19 pandemic in April.

Westpac’s monthly sentiment survey for August plunged 10 per cent to 79.5 points, extending its declines from July and almost entirely erasing the rebound in optimism from the low of 75.6 pts four months prior.

Westpac chief economist Bill Evans said he expected the index to fall further this month in the wake of the deteriorating situation in Victoria, but that he was surprised by the scale of the fall and said it “may well prove to be a significant over-reaction”.

Most surprising was that sentiment among NSW consumers collapsed by 16 per cent – almost double the fall experienced in Victoria, to sit at 77.8pts and just below Victoria’s 78pts.

Even in Queensland, where the virus has been virtually eliminated, consumer confidence deteriorated by 8 per cent to 79.7 pts – not far above its two southern neighbours.

Mr Evans said the sharp falls in consumer confidence in states without severe outbreaks “emphasises the fear of the unknown”.

“Consumers across the nation appear to have been rattled by the developments in Victoria and fear that other states may also succumb to the ‘second wave’ outbreak. Our view is that these fears are likely to have become overblown.”

Households were markedly more pessimistic across the five components of the Westpac index, the report showed. But the largest falls were around the economic outlook over the coming 12 months, and assessments of whether it was a good time to buy a major item.

Confidence in the near-term economic situation slumped 19 per cent, and at 53.6pts was below April’s 53.7.

Yesterday NAB’s monthly business survey showed sentiment among firms suffered a hit in July, led by Victoria. As is the case among businesses, West Australian consumers were more upbeat than the rest of the country, with Westpac’s sentiment index for the western state easing only 1.5 per cent to 85.9pts.

The index in South Australia fell by 5.8 per cent to 81.8