Australia Consumer Sentiment Declines as Virus Fears Resurface

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Australian household sentiment declined this month as concerns mounted about the new omicron variant of coronavirus in the nation’s recently re-opened eastern states of New South Wales and Victoria.

The consumer confidence index dropped 1% to 104.3 points in December, Westpac Banking Corp. said in a statement Wednesday. Optimists still outweighed pessimists, with 100 points the dividing line between the two.

“While high vaccination rates have allowed the ‘delta states’ to reopen, there appears to be a heightened sensitivity to virus developments in those states where there is likely more concern about the newly emerging Omicron strain,” Westpac Chief Economist Bill Evans said.

The nation’s two most populous states began easing stay-at-home orders in October after reaching their vaccination targets, ending a protracted lockdown that caused the A$2.1 trillion ($1.5 trillion) economy to contract last quarter. The lifting of restrictions prompted an initial surge in mobility and activity.

But coronavirus cases are again on the rise, with New South Wales recording a surge in infections this week as authorities struggle with the omicron variant.

Evans also pointed to rising “awareness” among consumers about inflation as a reason for caution about the outlook. 

“A positive national index is very important for the strong growth outlook we see for 2022 which is dependent on a surge in consumer spending, as households re-emerge from restrictions and draw down on the large savings accumulated through the Covid lockdown periods,” Evans said. 

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