Charlie Nelson
director foreseechange
The March 2004 update of Consumer Pulse shows that a slightly reduced willingness to spend, in favour of reducing debt, combined with a small reduction in financial wellbeing has reduced the size of the Profligate Spender segment. This indicates a risk of a slowdown in consumer spending growth during the June quarter.
On average, just over $445 per discretionary $1,000 would be used for loan repayment. While not a statistically significant increase yet, most consumers are expecting further interest rate rises in the next six months, after the two rate rises in late 2003, and may be seeking to repair their balance sheets. This is the highest level recorded since this measure started in May 2003, but it may decline if the Reserve Bank does not increase rates further.
Nearly $330 per discretionary $1,000 would be saved and
$226 would be spent – the lowest recorded since this measure started in May
2003.
Nearly 60% of consumers perceive that they have no money to spare (Broke plus Struggling segments). About 25% have some discretionary spending power and a further 17% have few financial concerns. While the March 2004 measure has recorded the lowest level of financial wellbeing since May 2003, it is not a statistically significant deterioration yet.
Data on the perceived financial wellbeing has been measured in the five mainland capital cities since late 1996. There are no statistically significant trends over this period, but the impact of the GST package was statistically significant.
Since the introduction of the new tax package in July 2000
(with GST as its centerpiece) there has been an increase of 3.8% in the
proportion of adults who feel that they have discretionary income.
Some of the features of the new tax system that may have contributed to
this extra financial wellbeing include:
An upward trend in perceived financial wellbeing is expected as real incomes rise but perhaps consumers take on more commitments at least as fast as their income rises!
The Profligate Spender segment averages just under 20% of consumers. Data on spending disposition has been measured in the five mainland capital cities since late 1996 and variations in the size of the Profligate Spender segment are quite strongly correlated with variations in retail spending growth in the following quarter. As the sample size is 400 per wave, a difference of less than 6% in the size of the Profligate Spender segment is not significant. Aggregating over two waves reduces the significance threshold to 4% and aggregating over four waves reduces the significance threshold to 3%.
The March 2004 measurement of the size of the Profligate Spender segment, at 14.0%, is a statistically significant decline on the July and September 2003 measures. If this decline in the size of the Profligate Spender segment continues, this could result in a fall in retail spending growth, from an expected rate of 9% to 6%.
Over the period 1996 to 2002, there was a statistically significant upward trend in the size of the Reluctant Spender segment and a downward trend in the Frustrated Spender segment.
