Introducing an individual-level outlook index in Australia

Abstract

This study introduces an Individual-Level Outlook Index (ILOI), a novel consumer sentiment index that enhances the granularity of economic insights beyond traditional macro-level measures. Traditional consumer sentiment indices, such as the Westpac-Melbourne Institute Consumer Sentiment Index and ANZ-Roy Morgan Consumer Confidence Rating, primarily offer aggregated data that may mask important variation in consumer sentiment across different demographic groups. To address this limitation, the ILOI was developed by incorporating elements of the Fiscal Confidence Index (FCI) method, developed by the Peterson Foundation, while innovating in variable selection and analysis. The data were sourced from monthly surveys of Australian voters and analysed to provide macro, demographic, and individual-level insights. Our findings indicate that the ILOI aligns with traditional macro-level indices in tracking economic sentiment at an aggregate-level but also reveals important variations across demographic groups including age, housing tenure, and political affiliation, offering a more detailed and instructive analysis of what might be driving changes in consumer sentiment. The granularity provided by the ILOI method could better help policymakers and business leaders tailor their strategies than macro-level measures, making it a more valuable tool for policy development, communications and decision-making.