Consumers are feeling more stressed as Federal election approaches

Consumer stress is on the rise as the Federal election draws near, with concerns about the cost of living and policy uncertainty being significant contributing factors. Data from NAB indicates a notable increase in the NAB Consumer Stress Index during the December quarter of 2024, with stress levels reaching 62.5 points, up from 59.7 points in the previous quarter.

The report suggests that the higher stress levels are a reflection of growing worries among consumers regarding how government policies will affect their financial plans. A majority of respondents (56 per cent) expressed concerns about potential increases in government charges, such as land tax and council rate rises. The cost of living continues to be a key stressor for consumers, with a slight increase in stress levels despite fewer consumers noting price hikes in the final quarter of the year.

Many consumers are responding to these financial pressures by tightening their belts when it comes to non-essential expenses. Over half (52 per cent) of respondents reported cutting back on dining out, while 45 per cent are reducing their entertainment expenses, and 41 per cent are using their cars less to save on petrol costs. Additionally, Australians are finding ways to manage rising living costs by depleting their savings more quickly (33 per cent), selling possessions (20 per cent), or borrowing money from friends and family (15 per cent). Some individuals have taken on second jobs or increased their work hours to cover mounting expenses.

Looking towards the future, the majority of consumers anticipate that the risks of scams will rise (72 per cent), inflation will continue to increase (65 per cent), and the quality of life will deteriorate (42 per cent) in 2025. NAB Economics forecasts interest rate cuts this year as inflation trends towards the midpoint of the RBA’s target range. The bank predicts that consumer sentiment will improve with the implementation of rate cuts, leading to a surge in growth by early 2025, irrespective of the interest rate decisions made.

Overall, the data from NAB paints a concerning picture of the financial landscape for Australian consumers as they grapple with rising stress levels, fueled by uncertainty over government policies and the increasing cost of living. The forthcoming Federal election adds another layer of complexity, with individuals bracing themselves for potential financial challenges ahead.