Just 29 per cent of people said they would spend all of their refund. (Reuters: Steven Saphore)
Hopes of a tax cut-led retail recovery appear dented as Westpac’s regular consumer sentiment survey shows the majority of people plan to save most of their refund rather than spend it.
- Consumer confidence fell from 100 last month to 98.2 in September, meaning pessimists again outnumber optimists
- Survey respondents were more pessimistic about the economic outlook for the next year, but optimistic about the five-year horizon
- More than half of those surveyed planned to save at least half of the tax offset refunds they will receive in their returns from the ATO
The bank and Melbourne Institute added extra questions to their monthly questionnaire of consumers, asking people about the tax offset payments that came through from July 1 in tax returns.
So far, 16 per cent of those surveyed reported receiving a payment, while Westpac’s economists estimate that about 30 per cent of households are likely to receive a “meaningful” rebate.
Of those who had already received a payment, 29 per cent said they planned to spend it all, while 16 per cent planned to spend more than half of it.
That left more than half of survey respondents saying that they would spend less than half of their tax offset, with a quarter saying they would save the full amount.
Record number ‘don’t know’ where to put their savings
This tendency towards savings fits in with other, regular, aspects of the survey that show households continue to remain cautious about their financial positions.
Overall, pessimists again narrowly outnumbered optimists, with the index reading 98.2 — below the benchmark 100 number that indicates an evenly balanced view.
The index hit 100 last month after several months of pessimism.
When asked where the wisest place to put their savings was, 61 per cent nominated safer options such as deposits, superannuation or paying down debt.
There was a slight increase in the proportion nominating real estate investment (to 12 per cent), a slight decrease in those favouring shares (to 9 per cent) but a stunning increase in the proportion who said “don’t know” which, at 9 per cent, was the highest in the survey’s history dating back to 1974.
With interest rates at fresh record lows, the share market close to record highs and many major housing markets still relatively expensive and offering historically low rental returns, it perhaps is not surprising that people are struggling to decide how to invest their money.
“Many Aussies are confused about what to do with their money in the current environment,” CommSec chief economist Craig James said.
“While low interest rates may be seen as positive for borrowers, the fact that the cash rate is at all-time lows of just 1 per cent worries plenty of Aussies.”
Mixed economic outlook but house prices expected to rise
This is particularly so given the wary outlook most survey respondents had when it came to the Australian economy.
Consumer views about the health of the economy over the next year declined 3.1 per cent in September.
“The disappointing June quarter national accounts update — released in the middle of the survey week — undoubtedly had an effect,” Westpac’s chief economist Bill Evans noted.
“Despite this, expectations for the economy are still comfortably above their July low, when the RBA’s back-to-back rate cuts appear to have badly rattled consumers.”
AMP Capital senior economist Diana Mousina said the negative press around the GDP number and international economic developments risked becoming a self-fulfilling prophecy.
“There is a risk that the continual negative news around the domestic economy talks consumers into thinking that conditions are weaker than they actually are,” she wrote.
“The same is true of all the recession talk.”
The survey shows people are more worried than usual about the security of their jobs and also much less likely than usual to think now was a good time to buy a major household item.
However, households are more confident about the longer-term outlook, with positivity about the economy over the next five years rising 2.1 per cent this month and sitting comfortably above the long-term average.
People also think the housing market downturn has well and truly bottomed, with house price expectations surging 45.8 per cent since May, led by a large increase in New South Wales.
The expectation of rising prices has less people saying that now is a good time to buy a house, though that index is still above its long-term average following roughly two years of national dwelling price declines.