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Concerns about the cost of living are levelling out but other factors mean all income groups have cut back on spending, NAB says.
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Job anxiety stokes consumer stress levels to 4-year high
23 January 2024
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A spike in job security concerns has pushed consumer stress to the highest level since early 2020, NAB says.
The bank’s Consumer Stress Index rose for the fifth straight quarter during Q4 2023, from 57.7 points to 59.9 points, its latest survey of sentiment reveals.
Job security stress also reached its highest level since September 2020, spiking to 48.2 points and coinciding with an increase in the unemployment rate to 3.9 per cent in November.
“Concerns related to job security continue to climb, rising quite sharply in the December quarter,” NAB said.
Job security stress peaked at 52.3 points with the onset of COVID-19 in March 2020 before trending downwards to 39.7 points by September 2022.
Since then, job security stress has been rising consistently as economic conditions worsen, NAB said.
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“With expectations of some gradual easing in employment and rising unemployment through 2024 as the economy slows, concern around jobs is likely to remain elevated in the coming year,” it said, predicting the unemployment rate to reach 4.5 per cent by the end of 2024.
The index also showed a “levelling out” of cost-of-living stress. While it was still the biggest cause of concern for consumers, it remained unchanged from the September quarter at 69.4 points.
“Consumer stress related to cost of living levelled out in the December quarter as inflation measures continued to moderate,” NAB said.
“But it continues to weigh on the psyche of Australian consumers, with cost-of-living stress still trending above average levels in all monitored demographic groups.”
Overall stress levels were “significantly higher” in the lower income group (64.3 points), which reported elevated stress levels across the board: job security was measured at 53.3 points, retirement funding at 67.5 points and cost of living at 74.5 points.
Stress levels were lowest for retirees (51.5 points) and for consumers over the age of 65 (53.4 points).
“The flattening of cost-of-living stress against rising new concerns is becoming an important piece in the outlook for the consumer in 2024. Consumers across the income spectrum are looking for ways to save money and rein in spending,” NAB said.
NAB said individuals would embark on “consumption smoothing”, which involved making deliberate spending trade-offs to manage budgets and cope with unexpected expenses.
Consumers were most likely to cut back on discretionary goods and services during the December quarter. Over half of consumers surveyed cancelled or cut back on eating out at restaurants and 50 per cent cut back or stopped buying “micro treats” such as coffee, snacks and lunch.
Entertainment, car journeys and holiday plans rounded out the top five areas where consumers cut back.
NAB said the savings then went towards paying day-to-day living expenses for 60 per cent of consumers, while 42 per cent put their money in a savings or offset account. Around one in five used these savings to pay down their mortgage (20 per cent) or other debt (19 per cent).
“Consumers are becoming more intentional in the allocation of their disposable income and the purchasing journey is becoming more complex. NAB research continues to show the most common behavioural change among consumers is being mindful where they spend their money,” NAB said.
“When consumers want to purchase a product or service, more than ever they are turning to the internet and search engines to provide greater transparency and ease of comparing prices, highlighting the importance of search engine optimisation.”
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