10 May 2020
man riding a large wave

Behaviour change puts dampener on recovery optimism

By EY Oceania

Multidisciplinary professional services organization

10 May 2020
Easing social distancing and travel restrictions is only one part of the story for Australia’s recovery. As the old adage goes, you can lead a horse to water, but you can’t make it drink. Households and consumers may be far more cautious about getting out and about than first thought.

More than half of Australia expects a second wave of the coronavirus to impact the country between now and November, with more than 70 per cent saying they will be more cautious than otherwise about returning to normal patterns of behaviour when restrictions are eased.

It means businesses modelling a return to full capacity, or a significant bounce to BAU by the fourth quarter of this year may put themselves at risk of misguided optimism.  In its Future Consumer Index survey of 1000 people completed in the four days to 1 May, EY found that respondents expect it will be at least months but possibly years before they are comfortable going to bars and pubs, the movie theatre, a fitness club, outdoor sporting event, or concert.

More will be comfortable returning to restaurants faster than other activities, although plane travel may be off the cards for longer, with 85 per cent saying they’d feel uncomfortable flying.

EY Oceania Consumer Products and Retail Leader Lisa Nijssen-Smith, who also works with a number of large arts organisations, says businesses need to be wary of assuming that people will return quickly to the same patterns of behaviour. 

"There is a sense that everything will rebound and come back to normal a lot quicker than what this data is telling us,” she says. “Businesses need to be really mindful when they’re modelling consumer behaviour in their projections that it may take a while before people will be comfortable shopping next to each other, or sitting next to each other for extended periods of time in theatres or concert halls.” 

The data, to be updated every three weeks, will provide a comparable snapshot about how consumer confidence is changing, and how quickly, as Federal and State governments begin to open up different parts of the economy.

Economic growth is likely to be impacted, given private consumption accounts for around two-thirds of economic activity. EY Oceania Chief Economist Jo Masters cautions that the lower community confidence, combined with higher savings and more nervousness about people’s financial positions may mean the road out will be slower and more gradual than first thought.

That’s not to say sentiment won't change from this point in time. “Sentiment can change, and in the case of households change quite rapidly,” she says. “So much will depend on the messaging from governments about easing restrictions, the handling of outbreaks and, of course, personal experience.”

Even before coronavirus materialised, Australian households were already becoming increasingly cautious about spending. The headwinds seen in 2019 are still in play, and in some cases have been exacerbated by the coronavirus and its economic consequences, Masters says. Highly indebted households are now facing higher unemployment, loss of hours worked, wage growth that will be lower for longer, rising job insecurity and falling house prices.

“These concerns and uncertainties typically lead households to cut discretionary spending to boost precautionary savings or pay down debt. We’ve seen the household savings rate double in a single quarter when the GFC hit, reaching a peak of nearly 11 per cent of disposable income in the final months of 2008,” Masters says.

Businesses need to be really mindful when they’re modelling consumer behaviour in their projections
Lisa Nijssen-Smith
EY Oceania Consumer Products & Retail Leader

“That took seven years to fall back to 5.3 per cent of disposable income. And while mortgage repayment and rent deferrals are incredibly helpful for households trying to withstand this period, people are conscious that this will ultimately add to the debt pile down the road.”

Permanent behaviour change

Add to this the equally important consideration about people’s perception of their relative health and safety when moving around and businesses across a number of sectors should be modelling different recovery paths, including a new era when people do things very differently.

“I remember media companies were optimistic about real estate and classified advertising revenue coming back after it dropped off during the GFC,” Nijssen-Smith says. “But it never came back to the same extent. In the interim people had found different ways of getting that information online and they permanently changed their behaviours.”

She says businesses and arts organisations need to be thinking about structural changes to how people consume. “We can’t yet know if it’s a permanent change. If people are not missing seeing live theatre at the moment, will they be slower to resume their subscription tickets? If they’re getting used to zoom exercise classes in their lounge room, will they decide to cancel their gym membership?” Nijssen-Smith says.

The way for organisations to avoid big holes in forecast budgets is to look at contingency planning differently to how they previously have done it. She says most businesses are not accustomed to planning this way , but the difference between an organisation who does well, and one that doesn’t, will be how realistic their numbers are.  

“The role that boards need to play in scenario planning and stress testing management’s modelling is critical as management may be optimistic by nature, given executive teams want to believe their businesses will recover quickly,’ Nijssen-Smith says.

Keeping customers engaged

One of the best things organisations across the sectors can do at the moment is keep people engaged with their brands, and build brand loyalty. If retailers have better customer engagement through online transactions than their competitors, they may be able to build loyalty through this period. New, innovative and alternative digital offerings to keep customers engaged with the brand is another exercise that can help smooth the recovery, Nijssen-Smith says.

At the moment everyone seems tentative to return to their old habits, but maybe they won't be soon.
Lisa Nijssen-Smith
EY Oceania Consumer Products & Retail Leader

Ultimately, if people are cautious about being out and about, or spending during straitened economic times, then you want your brand to be the one they visit first, or recall having the best experience with during the lockdown period.

“At the moment everyone seems tentative to return to their old habits, but maybe they won't be soon,” she says. “The most interesting thing will be to see how people feel in three weeks time, because then we can tell if they’re becoming more comfortable as they are allowed to do more.”

Nijssen-Smith says she’s a perfect example. “I’m a fairly risk tolerant person but as it stands, I may be one of the last to go back to working in the office, just because at the moment I don’t feel comfortable getting back on public transport for my three hour return commute each day.”  


Easing social distancing and travel restrictions is only one part of the story for Australia’s recovery. Many will be hesitant to be out and about and less willing to be spending money negatively impacting the economy's road to recovery.

About this article

By EY Oceania

Multidisciplinary professional services organization