Economic Insights
Economics | September 14 2016
Consumers unsure about best savings options
Consumer confidence
 Consumer confidence: The Westpac/Melbourne Institute survey of consumer sentiment rose by 0.3 per
cent in September to 101.4. The confidence index is up 8.0 per cent on a year ago. The survey was
conducted between September 5 and September 9. That is, the survey period covered the interest rate
decision and economic growth data.
 Wisest place for savings: Banks (chosen by 29.9 per cent of respondents) were regarded as the wisest
place for new savings from “Pay Debt” (21.0 per cent) and Real Estate (15.4 per cent).
 Less certain: Over 5 per cent of respondents don’t know the best place to put new savings.
The consumer confidence figures have implications for finance providers, retailers, and companies dependent on consumer and
business spending.
What does it all mean?

These are uncertain times. And that is shown by the views of Aussie consumers regarding the best place to put
new savings. Before 2015, Aussie consumers had firm views about where to put new savings. But over the past
year, the proportion of people unsure about the best place to put new savings has lifted to the highest levels on
record. In March this year 7 per cent of people said that they didn’t know the wisest place for savings. The latest
survey result showed that the proportion of undecided consumers was still high at 5.3 per cent.

Despite super-low interest rates, almost 30 per cent of people still believe the best place for savings is the bank,
ahead of paying down debt and buying property.

Less than 5 per cent of Aussie consumers believe that the wisest way to use new savings is to spend it – the
smallest share in two years. It is clear that conservatism reigns amongst Aussie consumers.
What do the figures show?

The Westpac/Melbourne Institute index of consumer confidence rose by 0.3 per cent in September to 101.4. The
Craig James, Chief Economist
Twitter: @CommSec
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Economic Insights: Consumers unsure about best savings options
confidence index is up 8.0 per cent on a year ago.

The current conditions index rose by 3.5 per cent while the
expectations index fell by 2.0 per cent.

Three of the five components of the index rose in
September:
 The estimate of family finances compared with a year
ago was up by 3.5 per cent;
 The estimate of family finances over the next year was
down by 2.3 per cent;
 Economic conditions over the next 12 months was
down by 4.6 per cent;
 Economic conditions over the next 5 years was up by
1.1 per cent;
 The measure on whether it was a good time to buy a major household item was up by 3.5 per cent.

Gender & demographics: Men (index reading of 104.7, up 0.5 per cent) were still more optimistic than Women
(98.2, up 0.1 per cent). The sentiment index for young people rose by 4.1 per cent to 117.6 in September. Across
the other demographics: 25-44 years (index 108.6, up by 5.4 per cent); 45 years plus (index 92.6, down 4.5 per
cent).

Housing outlook: A good time to buy a dwelling? The index was down 2.5 per cent in the month but still up 7.5 per
cent on the year.

States: NSW (105.8, up 6.5 per cent); Victoria (index 101.7, down 2.2 per cent); Queensland (103.3, up 1.3 per
cent); Western Australia (89.2, down 14.2 per cent); South Australia (92.6, up 1.3 per cent).

Wisest place for savings: Most people favoured putting new savings in the bank as the wisest place for savings
(29.9 per cent of respondents). Next was “Pay Debt” (21.0 per cent) from Real Estate (15.4 per cent), Shares (8.6
per cent), “Don’t Know” (5.3 per cent), Superannuation (5.1 per cent) and “Spend it” (4.6 per cent),
What is the importance of the economic data?

Westpac and the Melbourne Institute release the Index of Consumer Sentiment each month. According to
Melbourne Institute: “The survey of consumer sentiment was first undertaken in 1973 and was conducted on a
quarterly basis until 1976, a six-weekly basis from 1976 to 1986, and has been conducted monthly ever since.”
Confident consumers may be more inclined to spend, especially on major items.
What are the implications for interest rates and investors?

The consumer sentiment data merely confirms results from the weekly survey – consumers are cautiously
optimistic.

If rates are cut again, consumers are seen as unlikely to spend the windfall or even borrow more. Actually, it’s
probably the reverse. Consumers are more likely to either pay debt down or pay debt off or put any extra savings
in the bank.

While interest rates could be cut again in November if inflation remains stubbornly low, expect that this will be
widely debated over the next seven weeks.
Craig James Chief Economist, CommSec
Twitter: @CommSec
September 14 2016
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