The outlook for retailing remains gloomy.Consumers will continue to shy away from non-essential spending in the coming year, as confidence is battered by rising utility bills, weak house prices and growing fears of job losses, a new survey predicts.
CLSA’s yearly survey of Australian households has found a growing number of consumers are cutting back on discretionary spending in a bid to get on top of their debts.
The prediction came as Commonwealth Bank analysts argued the prices of key assets, such as house prices, are now likely to rise at a slower pace because consumers are reluctant to continue taking on debt.
CLSA’s survey of 1,400 households found consumers are continuing to take a conservative attitude to debt, with “belt tightening” tipped to continue over the year ahead.
Some 55 per cent of respondents had cut back on their overall spending, up from 50 per cent last year, with higher utility bills their main cost concern.
It also said the share of households that were “very” or “extremely” concerned about their debt levels had risen from 17 per cent to 22 per cent.
“Consumers are feeling slightly worse off than 12 months ago and predict an even bleaker outlook,” it said.
“Savings are likely to remain stronger for longer as households continue to de-gear and we expect an ongoing reduction in credit card usage.”
Unemployment was also a rising concern, despite Australia’s relatively low jobless rate of 5.2 per cent.
The share of people who thought fewer jobs would be available in their industry rose to more than a third. Highly-paid workers were the most pessimistic.
The survey was conducted after the Reserve Bank’s 50 basis point interest rate cut in May, but before a further 0.25 percentage point cut in June.
Despite the recent pessimism, economists stress that consumers are still spending.
CommBank economists James McIntyre and Diana Mousina noted that consumer spending in volume terms was up 4.2 per cent in the year to March, and it was a key reason for the strong growth in the quarter.
However, they also said consumers are likely to continue saving 10 per cent of their income, and spending would only rise in line with wage growth. This meant future gains in asset prices would probably be more restrained.
“The pace of household asset price appreciation, housing in particular, is now expected to be less vigorous and more dependent on trends in income,” they said in a research note today.
Capital city house prices have fallen 3.6 per cent in the last year, and fewer than half of the respondents to CLSA’s survey thought house prices would rise in the year ahead, compared with 55 per cent last year.
This story Administrator ready to work first appeared on Nanjing Night Net.