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While, overall, Australians with home loan debt have so far expressed only moderate levels of concern, that concern “is rising”, according to National Australia Bank’s (NAB) head of behavioural and industry economics, Dean Pearson.
Speaking at NAB’s recent live Forward View event, Mr Pearson presented a snapshot of not just current Australian spending habits and debt concerns, but also proffered psychological insights in future trends: anxieties – particularly where loans repayments are concerned.
“When asked to rate to concern out of 10, it's risen to about 6.5 out of 10. That was 5.7 in Q2,” he highlighted.
“But what that average number really masks is the very significant number of highly concerned people - about one in four Australians - now indicating that … further rate rises would result in very high levels of stress over their home loan debt,” he explained.
In context, Mr Pearson explained that while many consumers would be having a buffer saved post lockdowns and pandemic, there was a ‘splurge’ by some immediately after.
“As COVID restrictions relaxed, many businesses anticipated something called ‘revenge spending. In effect, people would try and spend as much money as they possibly could to make up for lost time,” he stated.
“With many consumers having saved a lot of their disposable income through COVID - around $140 billion was saved during the pandemic - many of course, were in a position to actually spend more.
“Now for a while there they look[ed] like they might be right.
“In fact, our own customer data showed the consumer spending has remained very strong over recent months.
“That said our most recent data has showed that there is some softness coming through; our October result was negative and that ended nine months of positive spending growth, looking at our own data,” Mr Pearson explained.
“The last time we saw a decline was back in the Omicron-affected December 2021 results.”
Looking over the next 12 months, Mr Pearson outlined that consumer spending intentions have pretty much collapsed, based on feedback from when NAB ask consumers ‘how they're going to spend’ on major household purchases going forward.
“You can see pretty much corrections across the board, but particularly in areas such as holidays, home renovations and major household items,” he said.
Business perspective and the current ecosystem
According to Mr Pearson, NAB is able to see the way that supply chain issues are impacting small business due to its position “being Australia's largest business bank”.
“What we can see is, for one in four small businesses supply chains remain a very significant issue for them,” he said.
“Supply chain pressures are easing a little bit and, going forward 12 months, businesses are convinced that things will improve from here.
“It's still a very major issue for businesses, such as manufacturers, but also in the construction sector and wholesale,” Mr Pearson added.
“When we also asked SMEs how they believe supply chain issues could best be solved, they were pretty universal in their response - and that is to invest more in local manufacturing,” Mr Pearson stated.
“What COVID has really done is highlight the severity of Australia's industries’ reliance upon imported products,” he explained.
“For example, in the construction industry, China alone accounts for around 60 per cent of Australia's annual $6 billion worth of construction materials.
“The same time digitisation and technology are a key step going forward. “Prior to the pandemic, very few companies had real-time data, real-time inventory monitoring.
“Today, businesses are looking towards data and artificial intelligence to increasingly identify risks and potential shocks well before they get out of hand,” he said.
He added that consumers generally don't think much about supply chains, but did during pandemic shortages of consumables like toilet paper.
“Suddenly supply chains became a topic of national interest,” he said.
“At the same time, consumers were showing what was possible in a world of online retailing and home delivery and their behaviours and expectations have fundamentally changed.”
"Consumer spending has been strong despite the fact that we've had rising interest rates and cost of living concerns. But consumers remain far less optimistic than business," he assessed.
[Related: Home loan buffers eyed as bank customers squeeze spending]
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