Is Australia poised for a consumer spending frenzy?

Formerly cooped-up residents getting their consumer fix post-lockdown has been a stock image during the pandemic, with October’s emergence no exception. But will the spending continue?

As the residents of Sydney and then Melbourne exited protracted lock-downs last month, a subsequent consumer-spending frenzy might have been expected, with people rushing back to retail shops and hospitality venues as a release from pent-up desire. According to the consumer-spending tracker developed by professional services firm Accenture and data and credit bureau illion, October saw some mild rebound, but the longer-term question remains.

The online index, a part of the e61 Institute for economic research co-directed by Accenture managing partner and growth markets sustainability leader Andrew Charlton, draws its wealth of data from hundreds of thousands of anonymised, customer-consented bank transactions made in Australia every week, weighted to be representative and presented relative to average weekly spending in January of 2020.

Naturally, the economic disruption of Covid-19 and public health response measures coupled with government stimulus and support payments have had an impact on top of and sometimes counter to the common consumer-spending peaks and troughs of a standard calendar year. With the 2020 post-Christmas period being one of a natural downturn and gradual climb, all of a sudden the pandemic hits and the consumer graph goes haywire.

Leaving aside the shifting categories of consumption over the past eighteen months, the initial public shut-downs and stay-at-home orders saw total spending plummet, before a huge mid-year bounce in sync with stimulus measures followed by a bumper Christmas. Fast-forward to October 2021, as Australia’s two most populous cities emerge from yet another, longer lock-down, and could it be that we’re sitting at the foot of another hefty spike?

In writing for the Age in August, Charlton asked the question as to whether the bounce-back following the lockdowns brought about by the Delta variant would be as dramatic as last year, noting both the continuation of the primary contributing factors and the differing circumstances this time around. In 2020, the virus had been contained, yet the vaccination roll-out was still moving at a glacial pace. Those elements are now effectively reversed.

Here, the ongoing presence of Covid in the community may put a clamp on consumer confidence, as well as cause a reluctance to engage in public activities such as dining and entertainment. But as Charlton points out, even if confidence grows more slowly, it’s now starting from a higher base; employment and job security is up, and spending had showed resilience through the later lockdowns. Then there are the overarching conditions.

Coming frenzy

Interest rates remain incredibly low, government stimulus spending is still moving through the economy, and the consumer cash-pile due to the lock-downs is even greater than before, indeed, may be at its highest level ever in exceeding an estimated $200 billion. For Charlton, all signs now point to another Christmas shopping bonanza, with consumers already indicating they plan to spend more this year than during last year’s record holiday season.

And it could all start now. Coincidentally, Melbourne emerged from its extended 2020 lock-down in the final days of October (in-store retail also didn’t recommence this year until the end of the month) – right before the index sky-rocketed, with November’s peak eclipsing those of December. In addition to the Black Friday sales, another factor may also contribute to pushing November through the roof – predictions of shortages due to supply-chain disruption.

According to Accenture’s 2021 Consumer Shopping report, which predicts average consumers will spend $246 more than the $819 outlayed on gifts last year, some 42 percent of shoppers are concerned about short supply and intend to get their Christmas shopping done early – such that Charlton in his most recent column writes; “The toilet paper frenzy of 2020 was merely a dress rehearsal for what is about to take place in Australia over the next two months.”