Australia's productivity growth will need to pick up to placate shaken consumers, according to RBA governor Glenn Stevens.
In a speech to the Anika Foundation Luncheon on Tuesday, Stevens acknowledged that “the description of consumers as cautious has become commonplace,” adding that “it is not one I disagree with.”
This is happening despite Australia being in the middle of “a once-in-a-century event in our terms of trade,” Stevens said.
He suggested that there could be a less visible reason for declining consumer spending that the obvious factors such as natural disasters and volatile international markets.
While household income has been rising fairly consistently for years, there has been a disruption in real household asset growth per capita since the economic crisis. The trend shows little sign of returning to the growth rates of 1995 to 2005, which may have been abnormally high, he said.
To get back to the consumer spending trend seen in that ten-year period, Australia will need to improve its productivity growth rate, Stevens said.
“The income results of [doing so] would, over time, provide the most secure base for strong increases in living standards,” he said.
“That sort of an environment would be one in which the cautious consumer might feel inclined towards well-based optimism, and re-open the purse strings.”
In the wake of Stevens' remarks, Nielsen on Wednesday provided yet another indicator of weak Australian consumer sentiment.
Nielsen published a report stating that Australian online consumer confidence fell sharply in Q2 for the fourth straight quarter.
Australia was the steepest-declining nation of all 14 APAC markets covered in Nielsen's latest Online Consumer Confidence Survey.
Nielsen Pacific managing director Chris Percy attributed the concerns partly to worries over pending soaring utility costs, as well as rising food prices due to the lingering effects of the January flooding.
“Belt-tightening is the norm for many households as price increases erode family budgets.” Percy said.
Globally, online spending confidence fell to the lowest level in six quarters. APAC was the healthiest of the regional markets overall, but intention to spend declined sharply in the region.
The decline in Australia's index score outpaced the global slump, with average worldwide confidence falling just three points on the index.