Australian consumer confidence had hit a record low as households become increasingly nervous about the rapidly rising unemployment rate.
The Sensis Consumer Report, based on a survey of 1500 people, shows consumer confidence fell six percentage points over the last quarter to just 21%. About 51% of Australians are confident about the year ahead, while 30% are worried.
The state of the labour market is weighing heavily on consumers, with concerns about unemployment rising by 0.84 points in the past three months to 7.37 out of 10.
It is now the biggest concern for Australian households, just ahead of concerns about the economy and investment returns.
Report author Christena Singh says concerns about employment are hardly surprising given the state of the economy, but the level of concern is significant.
“Employment drives confidence. When we look at asking people why that is, they say they’re confident because they have a secure job, not just that they have a job. And that’s eating into the amount they spend. Consumers aren’t spending as much, and we’re seeing expenditure expectations dropping as well…that’s concerning for business,” she says.
“The drop in confidence and employment is quite significant.”
The economic downturn is also having a big impact on consumers’ willingness to embrace an emissions trading scheme.
Singh says concerns over the environment have grown over the last quarter, but only 55% of respondents are prepared to pay more for energy costs under an emissions trading scheme, down five points from the last quarter.
“People are feeling they’re not able to support this and less likely to pay that when they’re concerned about paying other things. In priorities it has gone done by a reasonably large drop.
“Over half of people surveyed say they are prepared to pay something, but when you look at how much, that’s gone down.”
But Singh says there is hope ahead, and expects the drop in confidence has just about reached its lowest point.
“Certainly when you look at what people are saying, on whether people think it’s going to get worse…that’s improved in the last quarter. Confidence is going down but people don’t think it’s going to get too much worse,” she says.
“Going forward at the end of 2009 we’ll hopefully be operating in a different economic environment.”
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Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
