2023: The year marked by a somber mood among consumers.

As we hobbled towards the conclusion of the tumultuous consumer year that was 2023, many found themselves facing a holiday season overshadowed by the looming specter of rising interest rates—a scenario reminiscent of the Grinch attempting to steal Christmas.

The latest consumer sentiment data from Westpac, the lowest recorded in all but one year since the data collection’s inception in 1974, portrays a gloomy outlook surpassing even the depths of the COVID era and the global financial crisis. Although 1990 held a worse sentiment score, that year was marked by the onset of a severe recession, with interest rates soaring to around 18 percent.

In contrast, 2023 managed to evade a technical recession, boasting nearly full employment. However, the prevailing economic malaise takes the form of a consumer recession or stagnation, driven by the challenge of income growth lagging behind the relentless increase in the cost of living. The sentiment reading for 2023 vividly illustrates the anguish and anxiety experienced by consumers grappling with the assault of escalating living expenses.

Matthew Hassan, Westpac’s senior economist, and the survey’s author, highlights that consumers have witnessed their incomes facing unprecedented pressure due to a surge in the cost of living, substantially higher interest rates, and an escalating tax burden. While the sentiment reading for December showed a slight improvement from November’s, both months were historically characterized by exceptionally low consumer confidence.

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