Allianz Future Optimism Index : Rebound in economic optimism following post-Budget slump

Sydney, 19 August 2014

• Overall, Australians’ optimism about the future of the economy has rebounded from its post- Federal Budget slump.

• However, the increase was driven almost exclusively by a rise in optimism among men.

• Queenslanders and West Australians remain in a post-budget slump in economic optimism.
• Therefore, the rise in economic optimism was limited to those living in NSW, Victoria and South Australia.

• Rebound in optimism was also mainly driven by those aged less than 50 years old.

• Politically, the rise was driven exclusively by an increase in optimism among Labor and other non-Coalition voters.

Australian’s overall level of optimism about the future of the economy has rebounded since falling in response to the Federal Budget, returning to its pre-budget score of 10 on the Allianz Future Optimism Index. This continues a consistent trend of economic optimism bouncing back from a post-budget slump within a few months, despite the latest Budget being widely regarded as the ‘toughest’ since 1996.

However, the overall rise in optimism disguises some interesting optimism ‘divides’ based on gender, geography and age. In particular, the rebound in economic optimism from its post-Federal Budget slump is driven by:

• Men, whose Index Score jumped from 5 to 16, while there was no statistically significant rise in optimism among women;

• Those living in NSW, Victoria and South Australia, with Queenslanders and West Australians remaining in the economic doldrums; and

• Australians aged under 50, whose rise in optimism accounts for most of the overall increase from an age perspective.
- Those aged 50 to 64 were in the doldrums even before the budget and remain there, while optimism among the over sixty-five’s was unaffected by the Budget and remains high.

Commenting on the results, Allianz Australia Managing Director, Niran Peiris, said “Australians’ optimism about the future of the economy has completed its normal Federal Budget cycle, that is, slumping after the budget and returning to pre-budget levels within the following few months. However, the overall results continue to disguise clear divides in optimism between different groups of Australians depending on their gender, age and the State in which they live.”

“For example, at various times over recent years, the level of optimism among men and women has diverged markedly and this occurs again in the latest survey. As a result, most of the overall rebound in economic optimism was driven by men.”

“In terms of age, the change in sentiment since the post-budget slump is driven by those aged under 50. On the other hand, middle-aged Australians, those aged 50-64, remain in the economic doldrums; while optimism among senior Australians was unaffected by the budget and remains relatively high.”

“The geographic divide in economic optimism is particularly interesting. The post-mining boom States of Queensland and Western Australia show no signs of improved economic optimism. Queensland has not recovered from its post-budget slump, while the fall in optimism among West Australians preceded the Federal Budget and is also yet to recover.”

“From a geographic perspective, therefore, the overall rise in economic optimism can largely be attributed to those living in NSW, Victoria and, even South Australia, where optimism began falling before the Federal Budget and hit rock bottom after, when South Australia was the only State to record a negative optimism score.”

“The latest survey continues to confirm that voting intention and the colour of the government in Canberra is key determinant of voters’ economic optimism. Thus, Coalition voters’ optimism jumped after last year’s change of federal government, was unaffected by the May Budget and remains high. The change in the overall level of optimism is driven therefore by the sentiment of non-Coalition voters, which has rebounded from its post-budget slump.”

Survey results

All Australians

Overall, Australians’ optimism about the future of the economy has rebounded from the normal post-Federal Budget slump, returning to the level experienced prior to the May Budget. At a Score of 10, the Index has returned to levels that are normally experienced when not impacted by Federal Budgets or other temporary falls in optimism.

Future of the Economy: Optimism Index for all Australians

Optimism by Gender

The fall in economic optimism following the May Federal Budget saw a gap emerge between the sexes, with men more optimistic than women. This gap has widened in the most recent survey, with optimism among men rising strongly and almost fully explaining the overall rise in optimism. There was no statistically significant rise in optimism among women and the gap between the sexes has returned to levels not seen since June 2011.

Future of the Economy – Optimism Index by Gender

Optimism by State

Geographically, the rise in optimism about the future of the economy is driven by the south-east States, with NSW, Victoria and South Australia all showing rises in optimism.
Queensland’s post Federal election optimism held up into the new year, when it was falling in most other States, which resulted in a sharper post-budget fall in Queenslander’s optimism compared to other States. And that is where it has remained, with Queensland showing no material increase in optimism despite a strong rise across the border in NSW. The same applies in Western Australia, which also remains at low levels of economic optimism, which were first recorded in February, even before the May Federal Budget.

Future of the Economy – Optimism Index by State of residence

Optimism by Age

The rise in optimism about the future of the economy has been largely driven by Australians aged less than 50 years. It was those Australians whose economic optimism suffered most from the Federal Budget, which by July has been fully reversed. Those aged 50 to 64 remain in the economic doldrums, while the optimism of older Australians, those aged 65 or over, remains relatively high and unaffected by the budget.

Future of the Economy – Optimism Index by Age Group

Optimism by Voting Intention

The July survey reconfirms the findings since last September’s change in Federal Government that, in terms of its absolute level, Australians’ optimism about the future of the economy is closely linked to their voting intentions at the national level.
Thus, it is movements in optimism among particular political party voters that is the key driver of changes in overall levels of optimism. This is evident in the latest survey, which saw the overall rise driven exclusively by a jump in economic optimism among ALP and other non-Coalition voters. There has been no statistically significant change in optimism among Coalition voters since the Budget, which remains at its high, post-election levels.

Future of the Economy – Optimism Index by Voting Intention

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:

The future of the economy;
The future of the environment in relation to pollution and climate change;
The future of our society in relation to crime levels and community values;
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.

The latest survey was conducted by telephone among a national sample of 1205 adults aged 18+. Fieldwork was conducted over the period of the 25-27 July 2014 and results were post-weighted using the latest Australian Bureau of Statistics population estimates.

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