Confidence for 2023 dives as households endure soaring costs 

CCIWA Chief Economist

Aaron Morey

The confidence of WA households for the coming year has tumbled to its weakest position in six years, worse than during the COVID downturn. CCIWA’s final Consumer Confidence Survey for 2022 shows one third of WA consumers reducing their spending on essentials, as every factor driving household confidence – from jobs, the domestic economy, and global risks – swung towards ‘negative’. 

 

In the short term, Western Australians expect economic conditions to worsen (37%), rather than strengthen (16%), an 18-point decline in sentiment. Looking to 2023, two in every five WA households (39%) expect the economy to worsen in the next 12 months, the weakest long-term sentiment since December 2016. One quarter (26%) anticipate better economic conditions. Across these two measures, confidence has fallen by 20 points. 

 

Living costs are cruelling confidence, cited by a record-high four in every five respondents (79%). Concerns about interest rates have soared by 33 percentage points since the Reserve Bank rate hikes began, impacting the confidence of seven in ten households (69%). 

 

In this edition, CCIWA surveyed how WA’s consumer spending has changed under current cost conditions. 

 

More than half of respondents have reduced their spending on holidays and entertainment (54%), cafes and restaurants (54%) and consumer goods like electronics, cosmetics and clothing (52%). On the home front, spending on renovations, homeware and furniture was reduced by two in five respondents (42%). Around one third of Western Australians have reduced their spending on essentials like groceries (37%), transport and fuel (37%) and health care (26%). 

The impacts were particularly felt by mortgage-holders, of whom four in five (84%) reduced their spending on at least one category. 

 

Approaching the end of 2022, nearly half of Western Australians (46%) have dipped into their savings or offset accounts to cover higher living costs, especially young people (59%). The average WA household has drawn down approximately 30% of their financial reserves in the past six months. 

 

Facing risks of global inflation and geopolitical tension, Australian decision-makers should refocus on policy which encourages economic growth and resilience. To this end, the State Government should lower the burden of payroll tax in WA, and work to ensure WA gets a fair share of funding under the Federal Government’s $15 billion National Reconstruction Fund.

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