Both Business Sentiment and Consumer Confidence measures taken by NAB and Westpac respectively showed increasing pessimism among both groups. Business confidence declined, while conditions improved slightly, which suggests that even though businesses might be doing okay for now, there is an expectation that these reasonable conditions won’t last. Related to this is the very weak consumer confidence measure, which turned significantly weaker following the RBA’s cash rate increase on Melbourne Cup Day.

These surveys both support CreditorWatch’s latest prediction for Business Failure Rates. While business failure rates are quite low at the moment, we expect that they will quickly increase over the next 12 months to around 5.8 per cent. This is broadly the level that the failure rate was just prior to COVID. However, the speed at which we expect the rate to change is quite pronounced, and more businesses folding or going into administration is likely to have a noticeable impact on business sentiment overall throughout 2024.

The Westpac Consumer survey this month asked respondents a question about Christmas spending intentions, and 40 per cent of respondents indicated they intend to spend less on gifts than last year. The same proportion of respondents gave the same answer last year (and normal year is 30 per cent of respondents) which points to a particularly bleak Christmas outlook for Australian retailers. It is likely that Black Friday sales in late November will be very strong, as consumers hunt for bargains and carefully plan their Christmas spending. However, December spending is likely to be weak, as consumers avoid making last minute, full priced purchases.