Allianz Future Optimism Index: Australians finish 2012 with optimism about the economy in the doldrums

Allianz Future Optimism Index: Australians finish 2012 with optimism about the economy in the doldrums

Sydney, 24 January 2013

The end of 2012 saw Australians’ optimism about the future of the economy fall back to near record lows, following a short-lived mid-year rebound.

Optimism fell most markedly in South Australia, with Victoria, Western Australia also slipping.

The mood in South Australia is the most sombre of all the States and has the lowest level of optimism the survey has ever recorded.

The slump was also driven by a fall in optimism among those aged 65 and over, who have also recorded their lowest yet level of optimism.

The stark difference remains between much more optimistic ALP voters and their more pessimistic Coalition counterparts.

Allianz Australia Managing Director, Niran Peiris, said “Australians finished 2012 with their optimism about the future of the economy at a near record low. Optimism hit rock bottom after the May 2012 Federal Budget but made a reasonable comeback over the following months. However, this rebound has proved short-lived, with optimism falling back to near record low levels in December.”

“The biggest falls in optimism have been seen in Victoria, Western Australia and South Australia. However, South Australians are clearly the least optimistic, experiencing a 10-point slump in their Index Score and is the only State to fall into negative territory.”

“The fall in optimism about the future of the economy has been particularly apparent among Australians aged 65 and older. The survey has traditionally found senior Australians to be more optimistic than most other age groups, however, the impact of falling interest rates on investment incomes appears to be taking a toll on their optimism. Optimism among senior Australians has slumped twice in the last 12 months, on both occasions following Reserve Bank reductions in the cash rate.”

Background

Allianz and Newspoll have joined forces to conduct a bi-monthly survey which measures Australians’ level of optimism about the future of the economy, environment and society, as well as their overall happiness. Optimism indexes in each of these four areas are created to measure changes in optimism over time and differences in optimism among those in different demographic groups.

Respondents’ score their level of optimism on a scale from zero to ten. Those that score between zero and three are regarded as pessimists and those that score between eight and ten as optimists. Those that score between four and seven are regarded as neutral.

The net result of deducting the proportion of pessimists from the proportion of optimists gives the relevant Optimism Index. A positive Optimism Index results if the number of optimists exceeds the number of pessimists, and the reverse results in a negative Optimism Index.

Survey results

All Australians

Optimism towards the future of the economy slumped in December after a short-lived rebound from the record low reached in the aftermath of the May 2012 Federal Budget. Compared to September’s score of 7, the Optimism Index for December fell to 3, which is the second lowest result after the slump to just 1 following last year’s Federal Budget.

table1

Optimism by State

While absolute Index Scores are lower across the country, compared to the previous survey in September, falls in optimism in December were most apparent in South Australia (2 to -8). Optimism has fallen to a lesser degree in Victoria (13 to 5) and Western Australia (17 to 7). These States, particularly WA, have traditionally scored highest on this index, but are now much closer to the other States in their sentiment.

South Australia stood out as the least optimistic State in December. It was the only State to record a negative Index Score, which at -8 is the worst in the survey’s history, and well below the State’s previous low of -1 which followed the 2012 Federal Budget.

Consistent with previous slumps in optimism, Western Australia’s score has returned to the pack. This compares with more optimistic periods where Western Australians generally record much higher levels of optimistic than other Australians.

table2

Optimism by Gender

Prior to September 2012, the Optimism Index revealed a difference between the sexes in relation to their optimism towards the future of the economy with males on average almost 9 index points higher. The narrowing of this difference in September has continued in December, with optimism among men and women both falling by similar magnitudes.

table3

Optimism by Age

A fall in optimism about the future of the economy is most notable for older (65+) Australians. Optimism among this age group slumped in May 2012 following the Federal Budget, which also followed a relatively large 50 basis point reduction in the cash rate by the Reserve Bank on 2 May. December’s slump in optimism also followed interest rate reductions in both October and December. Optimism among senior Australians, many of whom rely on investment income, appears particularly sensitive to interest rate changes.

table4

Optimism by Voting Intention

In terms of voting intention, the fall in optimism about the future of the economy was more or less evenly spread, with no particular group demonstrating a more statistically significant drop in optimism than any other.

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About the Allianz Future Optimism Index

The Newspoll survey on which the Allianz Future Optimism Indexes are based, asks around 1200 Australians to rate each of the following statements on a scale of 0-10, where 10 is extremely optimistic and 0 is not optimistic at all:

1. The future of the economy;
2. The future of the environment in relation to pollution and climate change;
3. The future of our society in relation to crime levels and community values;
4. The overall future prospects and happiness for you and your family.

Respondents’ score their level of optimism on a scale from zero to ten. Those that score between zero and three are regarded as pessimists and those that score between eight and ten as optimists. Those that score between four and seven are regarded as neutral.

The net result of deducting the proportion of pessimists from the proportion of optimists gives the relevant Optimism Index. An Optimism Index of 100 would result if all respondents scored between eight and ten and an Index of minus 100 if they all scored between zero and three.

A positive Optimism Index results if the number of optimists exceeds the number of pessimists and the reverse results in a negative Optimism Index.

More detailed demographic and geographic results for the Allianz Future Optimism Index are available on request.

The latest survey was conducted by telephone among a national sample of 1242 adults aged 18+. Fieldwork was conducted over the period of the 7-9 December 2012 and results were post-weighted using the latest Australian Bureau of Statistics population estimates.

Allianz Australia

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Allianz Australia delivers a wide range of personal, commercial and corporate insurance products and services to more than 2 million policyholders. Over 50% of Australia’s top 200 BRW-listed companies have some form of insurance cover with the group and the group provides workers compensation services to around one-fifth of Australian employees.

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