Australian retailers will likely face a tight labour market this Christmas as consumer sentiment refuses to budge from its all-time record low.
The latest ANZ-Roy Morgan Consumer Confidence for this week dropped by 1.1 percentage points to 77.6 and has now spent an all-time record 28 straight weeks - equivalent to over six months - below the mark of 80. The second-longest stretch for the index was seen between September 1990 and January 1991.
Consumer confidence is now 8.1pts below the same week a year ago and is just below the 2023 weekly average of 78.1.
Weekly consumer confidence has now spent eight weeks since mid-July within a narrow band of four points (75-79) and averaged 77.1 since the week of July 17-23, 2023.
Driving the small decrease in the index this week was a decline in sentiment around the long-term fortunes of the economy and buying sentiment, ANZ and Roy Morgan reported.
Now, 21% (up 1ppt) of Australians say their families are ‘better off’ financially than this time last year compared to 55% (up 2ppts) that say their families are ‘worse off’ financially.
Looking forward, 30% (down 1ppt) expect their family to be ‘better off’ financially this time next year while 33% (down 3ppts), expect to be ‘worse off’.
Looking further ahead, 11% (down 1ppt) of Australians expect ‘good times’ for the economy over the next five years compared to 23% (up 4ppts) expecting ‘bad times’.
For buying intentions, 19% (down 2ppts) say now is a ‘good time to buy’ major household items while 53% (up 1ppt) say now is a ‘bad time to buy’.
ANZ economist Madeline Dunk said the index hit a roadblock this week.
“This is despite the RBA keeping the cash rate on hold at its September meeting, and the Q2 GDP data suggesting that Australia is on track for a soft landing.
“Confidence has now printed below 80pts for six months in a row – the longest stint on record.”
Meanwhile, the unemployment rate remained at 3.7 per cent in August (seasonally adjusted), new Australian Bureau of Statistics (ABS) data revealed. This comes following a 0.2% increase from June to July.
ABS head of labour statistics Bjorn Jarvis said employment increased by around 65,000 people while the number of unemployed dropped slightly by around 3,000 people.
“The large increase in employment in August came after a small drop in July [15,000], around the school holiday period,” Jarvis said. “Looking over the past two months, the average employment growth was around 32,000 people per month, which is similar to the average growth over the past year.”
The employment-to-population ratio rose 0.1 percentage point to 64.5 per cent, around the record high in June, Jarvis added.
“The participation rate also increased, up to a record high of 67.0 per cent in August, which, together with the high employment-to-population ratio, continues to reflect a tight labour market.”
Monthly hours worked fell 0.5 per cent in August 2023 following an increase of 0.2 per cent in July, while employment rose by 0.5 per cent.
Despite a small fall in August, hours worked were 3.7 per cent higher than August 2022, continuing to reflect faster growth than the 3.0 per cent annual increase in employment.
“The strength in hours worked over the past year, relative to employment growth, shows the demand for labour is continuing to be met by people working more hours, to some extent,” Jarvis said.
However, Roy Morgan data indicated that August’s real unemployment increased by 1.9% to 11% - an estimated 1.7 million Australians. This is up 305,000 from July.
This is the highest rate of unemployment for over two years since March 2021 during the middle of the pandemic, the research firm noted.
According to Roy Morgan, its unemployment estimate was obtained by surveying an Australia-wide cross section of people aged 14+.
“A person is classified as unemployed if they are looking for work, no matter when,” the firm explained. “The real unemployment rate is presented as a percentage of the workforce (employed & unemployed).”
Australian employment fell by 132,000 to 13,648,000 in August, Roy Morgan reported, due to a fall in full-time employment - down 274,000 to 8,796,000 - although there was an increase in part-time employment which was up 142,000 to 4,852,000.
More people are looking for full-time work, up 67,000 to 660,000, and more people are looking for part-time work - up 238,000 to 1,026,000 - both at their highest since the March 2021 quarter.
In total 3.08 million Australians (20.1% of the workforce) were either unemployed or under-employed in August, up by 268,000 from July.
Compared to early March 2020, before the nation-wide lockdown, in August 2023 there were more than 900,000 more Australians either unemployed or under-employed (+4.5% points) even though overall employment (13,640,000) is almost 800,000 higher than it was pre-COVID-19 (12,872,000).
Roy Morgan’s unemployment figure of 11% is almost triple the ABS estimate of 3.7% for July but is in line with the combined ABS unemployment and under-employment figure of 10.1%.
“We have highlighted for months now that there’s been a rapid increase in the Australian population over the last year - a record increase of 706,000 - and this has flowed through into a rapidly expanding labour market,” Roy Morgan CEO Michele Levine said. “The Australian workforce increased by 484,000 compared to August last year.”
“However, although there have been many new jobs created compared to a year ago, the rapid workforce growth has outpaced the economy’s job creation as we deal with high inflation and rising interest rates. Overall employment is up by 161,000 compared to a year ago while unemployment has increased by 323,000.”
ABS data showed that Australia’s population grew by 2.2 per cent to 26.5 million people in the 12 months to 31 March this year.
13 months after international borders were re-opened, ABS head of demography Beider Cho said net overseas migration accounted for 81 per cent of growth and added 454,400 people to the population in the year to March 2023.
Net overseas migration was driven by a large increase in arrivals - up 103 per cent from last year to 681,000 - and only a small increase in overseas migrant departures - up 8.8 per cent to 226,600.
“This pattern, low departures in particular, is a catch-up effect after closed international borders, as international students return with only a small number departing because very few arrived during the pandemic,” ABS noted in a media release. “This effect is expected to be temporary as the number of departures will increase in the future as temporary students start departing in usual numbers.”
Natural increase was 108,800 people, a decrease of 18.5 per cent from last year.
“In addition to the surge in immigration, the key factor influencing the Australian economy at the moment is inflation and the increases in interest rates designed to reduce it,” Levine continued. “The RBA has increased interest rates on 12 occasions since May 2022 to 4.1%.”
“The good news is that the RBA appears to have finished its interest rate hiking cycle after leaving interest rates unchanged for a third month in a row in September– the first time they have done this since beginning their interest rate increasing cycle just over a year ago.”
Levine said the latest official monthly inflation figures for the year to July 2023 show inflation dropping to an annual rate of 4.9%. This is the lowest it has been since February 2022 (also 4.9%).
“This is down from a peak of 8.4% in the monthly annual rate for December 2022 – a decline of 3.5% points in seven months,” Levine said. “At this rate of decline of 0.5% points per month, inflation will be in the middle of the RBA’s target band of 2-3% by the end of the year.
“New RBA Governor Michele Bullock takes charge of the central bank next week as Australia’s first female Governor and with the latest inflation figures trending in the right direction Governor Bullock will be hoping this trend continues as she undertakes to lead the bank through this challenging period.”