Australia has a confidence problem and the numbers are becoming increasingly difficult to ignore.
The Westpac–Melbourne Institute Consumer Sentiment Index fell 4.7 per cent in October to just 80.4 points, while OECD figures place Australian consumer confidence at about 98.4 per cent below its long-term benchmark.
That’s the largest decrease in consumer confidence across all developed nations and the biggest in a long time for Australia.
And there is good reason for this fall, with the Reserve Bank increasing interest rates again on 29 September, lifting the official cash rate to 4.6 per cent – its highest level in 15 years.
While our unemployment rate increased to 4.7 per cent in September, its highest level in about five years, with employment falling by almost 40,000 people.
Here in Victoria, unemployment stands at 5.1 per cent – the highest of any mainland state.
Then there was another headline that caught my attention. Sydney, Melbourne, Brisbane and Adelaide are ranked among the world’s 12 least affordable housing markets – ahead of London! London! A city synonymous with expensive property.
These aren’t simply numbers on an economist’s spreadsheet. They represent our increasing uncertainty about our financial security and future. And when people lose confidence in their financial future, confidence in economic leadership can follow.
We are seeing expressions of that frustration elsewhere.
Over the weekend, an estimated 550,000 people took to the streets across France, protesting living costs, public services and an underfunded, deteriorating education system! Sound familiar?
While the demonstrations involved multiple grievances, they also raise an interesting question: what happens when people lose confidence that tomorrow will be better than today?
In France, frustration has spilled onto the streets. In Australia, uncertainty may be expressed differently, through reduced spending, delayed investment and postponed property purchases.
With housing increasingly unaffordable and employment uncertainty rising, is it any wonder consumer confidence is weakening?
But its not all doom and gloom. Australia is a large country and amongst all this turmoil and low confidence regional Victoria is doing OK.
Despite the negative headlines, Geelong’s property market continues to demonstrate resilience. Regional Victoria’s median house price is about $673,500, compared with metropolitan Melbourne at more than $943,000 – a difference of about $270,000, or 29 per cent.
At a time when households are concerned about mortgage repayments and living costs, affordability matters.
According to PropTrack, Geelong home values increased 0.46 per cent in September, ending six consecutive months of declining values.
Greater Geelong houses were also reportedly selling in about 32 days, compared with 43 days a year earlier.
Buyer inquiries have increased in some of our more affordable suburbs, including Marshall (85 per cent) and Grovedale (66 per cent) over 12 months.
While these figures suggest demand remains, we should not confuse resilience with immunity. Some suburbs continue to experience softer values, and construction costs, taxation, planning delays and infrastructure constraints remain significant challenges.
Nevertheless, Geelong’s diversified economy, population growth, employment opportunities, education, healthcare, coastal amenity and proximity to Melbourne provide sound fundamentals.
Perhaps confidence in regional Victoria is not necessarily stronger because people feel better about the economy, but because they can see greater opportunity and affordability in their own communities.
With the Victorian election approaching on 28 November, there is another consideration: the potential for a change in economic direction.
Opposition Leader Jess Wilson and the Liberal–National Coalition have proposed several initiatives to revitalise our CBD, something that has lacked investment in decades. while Labor has outlined measures aimed at housing supply and economic development, whilse trying to rebuild their credibility.
Regardless who forms government, Victoria needs policies that encourage investment, reduce tax and development costs and restore competitiveness.
For Geelong, renewed economic confidence could translate into stronger investment, increased housing activity and greater opportunities for local businesses.
Perhaps the greatest opportunity for Victoria is not simply a change in government, but a change in confidence.
Confidence that Victoria can be a competitive place to do business. Confidence that investment will be encouraged. Confidence that families can afford a home and businesses can plan for the future.
Governments influence the economic environment, but people make the decisions that drive our economy.
Confidence drives decisions, decisions drive transactions and transactions drive markets.
And in property, numbers matter. But people matter more.