Allianz Future Optimism Index: Economic optimism takes usual post-Budget tumble

Allianz Future Optimism Index: Economic optimism takes usual post-Budget tumble

Sydney, 29 May 2014

Fall in optimism is consistent with the past, despite the budget being much ‘tougher’ than previous ones.

Fall in optimism is driven by non-Coalition voters.

South Australia’s optimism index falls into negative territory.

Women less optimistic about the economy than men.

The level of optimism about the future of the economy has slumped following the Federal Budget, falling to a score of 2 on the Allianz Future Optimism Index. This continues a consistent trend of post-Budget pessimism, even though the latest Budget is widely regarded as the ‘toughest’ since 1996.

On the face of it, it appears that Australians just don’t like Federal Budgets, regardless of the political colour of the government that delivers them or the level of fiscal stringency involved.

However, Allianz’s optimism survey reveals that it is not the case that all Australians don’t like Federal Budgets. In fact, post-Budget falls in economic optimism are largely driven by voters that do not support the Federal Government of the day. This is because the overall optimism result disguises significant differences in sentiment based purely on Federal voting intentions.

With an Index Score of 27, economic optimism among Coalition voters has not wavered following the Budget, remaining at the record high levels reached following the election of the Abbott Government. However, the strong level of economic optimism among Coalition voters is more than outweighed by a fall in optimism among non-Coalition voters. The Index Score for ALP voters has fallen from 4 to minus 9, while for ‘other’ voters (ie minor parties and independents), economic optimism fell by a similar magnitude, from a score of zero to minus 13.

This ‘voting intention’ driver of economic optimism was also apparent, except in the reverse, following the 2012 Budget. On that occasion, economic optimism fell to an Index Score of just 1, even though optimism among ALP voters remained unchanged on a score of 17. The reduction in optimism at that time was driven by a reduction in the optimism of Coalition voters, which fell from a score of zero to minus 7.

Commenting on the results, Allianz Australia Managing Director, Niran Peiris, said “Allianz commenced the optimism survey in late 2010 and the results have fluctuated and varied according to age, gender and State of residence in various ways. A consistent result over that period is that a Federal Budget generally causes a fall in economic optimism. Interestingly, it doesn’t much matter how ‘tough’ the Budget is, just the fact of having one impacts optimism.”

“However, post-Budget falls in optimism do not appear to be driven by an across-the-board change in sentiment among all Australians. Now we have had a Federal Election since the survey commenced, we can see that Federal voting intention is often a key factor in economic optimism, particularly in response to a Federal Budget.”

“When Labor was in power in Canberra, ALP voters were generally more optimistic about the future of the economy than Coalition voters. This has been totally reversed by the election of the Abbott Government, with Coalition voters now significantly more optimistic about the future of the economy than those that vote Labor or for minor parties and independents.”

“In terms of how they view the future of the economy, the Budget appears to have been given the ‘thumbs up’ by Coalition voters, whose optimism has remained at post-election record highs, despite what is widely regarded as a ‘tough’ Budget”, Mr Peiris added.

Survey results

All Australians

After reaching a post-Election high Index score of 15 in November last year, which had moderated by somewhat by February, Australians optimism about the future of the economy has fallen to near 2-year lows following the May Budget. However, the fall is consistent with previous post-budget slumps in optimism, particularly the 2012 Budget.

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Optimism by Gender

Economic optimism has fallen among both men and women, although it has fallen further among women, with the Index falling into negative territory for the first time since the 2012 Federal Budget. A gap has now emerged between the sexes with men more optimistic about the future of the economy than women.

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Optimism by State

Optimism about the future of the economy has fallen in all States since the post-Federal Election highs reached in November last year. However, optimism in the States has changed in different ways over the period since. Queensland’s post-election optimism held up into the new year, when it was falling in most other States. However, post-Budget, Queenslanders’ optimism has fallen sharper than that of other Australians to around the same levels of other States.

South Australia is the only State whose optimism index has again fallen into negative territory, a place it is not unfamiliar with.

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Optimism by Age

Optimism about the future of the economy among Australians aged 50 or more rose significantly after last year’s Federal Election but had fallen back by February this year. Optimism among Australians aged under 50 has fallen in response to the Budget. However, the Budget has had no adverse on the optimism of senior Australians aged 65 or older.

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Optimism by Voting Intention

Now that there has been a change of Federal Government since the survey commenced, it is clear that Australians’ optimism about the future of the economy is closely linked to their voting intentions at the Federal level.

In the period before last year’s Federal Election, during which the Labor Party held power in Canberra, ALP voters were always significantly more optimistic about the future of the economy than Coalition voters. The change of Government last September has seen a total reversal of this, with Coalition voters now much more optimistic about the economy than ALP voters. And while the impact on individuals of what is generally regarded as a tough Budget is politically colour blind, it has made Coalition voters even more optimistic about the future of the economy than they were before Budget night.

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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 1216 adults aged 18+. Fieldwork was conducted over the period of the 16-18 May 2014 and results were post-weighted using the latest Australian Bureau of Statistics population estimates.

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