• Australia’s snap lockdowns have hurt consumer confidence, effectively sinking to its lowest level since November.
• It reverses months of improvement as Australians temporarily lose faith in the recovery.
• ANZ head of Australian economics David Plank said he believes that confidence will bounce back as long as Sydney is able to end ongoing restrictions soon.
• Visit Business Insider Australia’s homepage for more stories.

Australia’s low vaccination rate is continuing to dictate government policy, pushing cities into lockdown and shaking national confidence in the recovery.

The latest outbreak of the Delta virus variant shut down four capital cities, Sydney, Brisbane, Darwin and Perth, at the end of June, shaking Australia’s faith in a containment effort that they have repeatedly been told is the ‘envy of the world’.

The shock of being urged again to stay at home, almost 18 months since the pandemic was declared, has unnerved Australians, the latest ANZ consumer confidence index shows.

Led by head of Australian economics David Plank, the index registered a 3.9% fall in consumer confidence, with confidence in Australia’s current economic conditions plummeting a full 7%. In fact, confidence fell on every one of the survey’s measures as restrictions were implemented.

“The drop in sentiment wasn’t confined to those areas directly impacted by restrictions,” Plank said. “For instance, while it fell by 8.9% in Sydney it also declined by 1.6% in the rest of NSW. Confidence fell in most other cities as well [including] Brisbane (-7.7%), Melbourne (-2.7%) and Adelaide (-6.5%).”

As an indicator of how Australians might be spending and saving, it suggests some of the wind has come out of the economic recovery. The measure of whether now was the time to buy a major household item fell 4.4%.

The overall result shows that lockdowns have effectively undone months of progress. Outside of a single week dip in April, it really takes Australia back to the lowest confidence levels really since the end of November last year following Melbourne’s longest lockdown.

Outside of the pandemic, it marks a level rarely seen in Australia, on par with the 2019-20 bushfires that burnt more than 18 million hectares, and the 2015 crash on the Chinese Stockmarket.

Plank believes Australia will see through the glut in confidence however, as long as Sydney, the final city under stay at home orders, can bring an end to its lockdown soon.

“With the lockdowns in Brisbane and Perth coming to an end, we can expect confidence, and consumer spending, to rebound reasonably quickly given past experience, but much will depend on whether restrictions in Sydney are able to be eased.”

The survey comes just hours before the Reserve Bank meets for its monthly meeting. It is expected to leave the official cash rate at 0.10%, as economists tip the RBA to hold the line on easy monetary policy for now.

Tuesday’s lack of conviction will be yet another reason for the central bank to continue striking an optimistic note, as it tries to get the recovery back on track.

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