The rising gold price and the willingness to hold cash in bonds rather than equities suggests that investors are still wary and prefer to hold corporate bonds until next financial year.
Taken together with overseas patterns of consumer sentiment it looks likely that affluent households are making a rush back to the retail tills. It would appear that markets will be favourable in the first half of the financial year before slowing down again in the second half.
Now that we finally have an stable government in Canberra and the prospect of elections in the Eastern States, smart companies will be pleased to learn that consumers are feeling good times are on the up once more. Australians are now saying that they are better off financially than this time last year and rising confidence in Australia as a whole over the next five years.
The Westpac-Melbourne Institute index of consumer sentiment released this month dropped 5% in September, reversing most of the 5.4% gain recorded in August.
The latest Westpac Confidence report suggests that customers appear to have come back to earth, probably on the realisation that the economy’s current strength can’t continue without another interest rate rise. Their latest reading of consumer confidence showed a surprising fall that almost wiped out gains from the previous month, despite a series of positive events that would normally have led to a more upbeat shopper. All components of the index fell in September, notably a 7.2% drop in expectations of economic conditions over the next 12 months.
Gary Morgan says that Consumer Confidence is 126.3 (up 3.3pts) after the two rural Independents decided to support the Gillard Government. According to the weekly Roy Morgan Consumer Confidence Rating that is now 5.1pts higher than a year ago. In terms of Australians’ personal finances, now 33% (up 5%) say their family is ‘better off financially’ than a year ago compared to 25% (down 3%) that say their family is ‘worse off financially’ than a year ago. In the long-term, 46%, (up 4%) of Australians expect Australia to have ‘good times’ economically over the next five years compared to only 12% (down 1%) that expect ‘bad times’ economically.
“The talk of further rate hikes has no doubt altered consumer perceptions,” Commonwealth Securities economist Savanth Sebastian says. ”The uncertainty about a longer term stable government has clearly had an effect on the consumer outlook.”
Westpac chief economist Bill Evans says, “the August reading may have overstated confidence when, contrary to media speculation, the RBA did not raise interest rates. As such, the September level of the index is probably a more reasonable indication of the level of consumer confidence.”
To make the most of these topsy turvy times, small business leaders will be extending their marketing initiatives to attract early orders on longer term credit lines and working with their customers to build a platform of pre-holiday season promotions that build brand presence and customer loyalty programs.
The emphasis will shift from discounted offers to quality assured brand promotions that are directed towards families and business interests that have been paying down debt. Premium service and close customer relationships will determine the pattern of winners in the next few months.
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Dr Colin Benjamin is an entrepreneurship and strategic thinking consultant at Marshall Place Associates which offers a range of strategic thinking tools that open up a universe of new possibilities for individuals and organisations committed to applying the processes of innovation, creativity and entrepreneurship.
Email dr.colinbenjamin@marshallplace.com.au
Contact: CEO Dr Jane Shelton, Phone +61 3 9640 0099
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
