Press Office

Sydney, 12 November 2008 — Despite current economic volatility, Australian consumers are more optimistic about the next six months (49.0) than they were for the first half of 2008 (42.8), and are less likely to curb discretionary spending over the next six months, compared to the rest of the Asia/Pacific region.

The inaugural MasterCard Worldwide Index of Consumer Purchasing Priorities and the latest MasterCard Worldwide Index of Consumer Confidence, which were released today, suggest Australian consumers believe that conditions will improve over the next six months.

“The Index reveals that consumer outlook is becoming more positive, after the 22.1 point drop experienced six months ago from the high of 64.9 a year ago . Now, Australians hold a neutral outlook, despite the rest of the Asia/Pacific region preparing for tough times ahead,” said Eddie Grobler, executive vice president, Australasia, MasterCard Worldwide.

Australian consumers are pessimistic about Employment (35.5), more so than six months ago (39.8) and a year ago (55.5). But they are less pessimistic than they were six months ago about the Economy (42.1 vs. 38.8 six months ago) and Quality of Life (48.2 vs. 32.7). They are more positive about the Stock Market (56.9 vs. 44.0 six months ago) and Regular Income (62.2 vs. 58.9).

In line with the consumer confidence figures, the MasterCard Worldwide Index of Consumer Purchasing Priorities suggests that less than half of Australians plan to curb their discretionary spend over the next 12 months.

Females, divorced or widowed, and those earning over AUD$45,000 a year are the biggest savers in Australia. Surprisingly, consumers who are divorced or widowed are also the biggest spenders on dining and entertainment by a long stretch. Females, consumers under 30 and single consumers are the keenest travelers. The under 30, single and divorced or widowed consumers are big spenders on fashion & accessories.

Overall the top purchasing categories revealed as Dining and Entertainment (60%), Personal travel (59%) and Fashion and Accessories (54%). Forty-four per cent of Australians spend above 10% of their personal annual income on discretionary items, and only 4% of Australians spend over 40%.

“While Australians are more optimistic than they were six months ago, there is still an air of caution in how they are spending their money. At a point where the direction of the economy is unpredictable, Australians are being responsible with their money when it comes to how much they allocate to discretionary spending,” said Mr Grobler.

This is different from the outlook across the region, with consumer confidence falling seven points from six months. Consumers across the Asia/Pacific are also tightening their belts, with 70% of the region’s consumers looking to cut back on their discretionary spend for the next 12 months, compared to 46.5% of Australians.

“Consumers across the region are bracing themselves for tougher times ahead in 2009. In most markets across Asia, more than half of the respondents surveyed are looking at cutting back on discretionary spend. Australia and New Zealand stand out as the only two markets where less than half of the consumers surveyed indicated a reduction in discretionary spend over the next 12 months. While many are looking towards China to help maintain economic growth momentum in the region, the fact is the Asia’s economic powerhouse itself is slowing down, with 60% of Chinese consumers indicating a reduction in discretionary spend,” said Dr. Yuwa Hedrick-Wong, economic advisor, Asia/Pacific, MasterCard Worldwide.

The new MasterCard Worldwide Index of Consumer Purchasing Priorities, which will be released annually, provides valuable insights into consumers’ savings and expenditure behavior and their discretionary spending priorities for the 12 months ahead. The long running MasterCard Worldwide Index of Consumer Confidence, now in its 16th year and released six monthly; continues to be a barometer of consumer sentiment in the region. A total of 6,019 consumers were surveyed for both the Indexes across 14 markets¹.

The Index is calculated based upon percentage response figures, with zero as the most pessimistic, 100 as most optimistic and 50 as neutral. Five economic factors are measured: Employment, the Economy, Regular Income, Stock Market and Quality of Life.

• Only four – Vietnam (88.1), China (76.6), India (63.9) and Singapore (62.3) - out of the 14 markets surveyed are optimistic about the first half of 2009, although all but Vietnam’s score had declined from six months ago. Australia was neutral (49.0). Hong Kong, having dropped from 83.1 six months ago to 41.8 currently, and Taiwan (from 71.3 to 32.1 currently) experienced the greatest decline in consumer confidence.
• The latest region wide consumer confidence score of 47.4 is below the score six months ago (55.0) and a year ago (67.3), but above the average of 32.3 during the 1997-98 Asian economic.
• Overall consumer outlook across the region fell for all five indicators measured from six months ago - Employment (from 54.2 to 41.2), Economy (from 51.8 to 42.1), Quality of Life (from 48.2 to 44.0) and the Stock Market (from 53.4 to 45.5). The outlook for Regular Income (from 72.2 to 64.3) declined but remained optimistic.

• Consumers across the region currently spend an average of between 10 – 20% of their personal annual income on discretionary items. Some 30% of consumers spend 21% - 50% of their personal annual income on discretionary items, and 5% of respondents said they usually spend more than 50% of their personal annual income on discretionary items.
• Seventy percent of the region’s consumers, however are looking to cut back on discretionary spend over the next 12 months. Markets with the highest number of consumers looking to reduce expenditure are Taiwan (90.8%), the Philippines (90.5%) and Korea (85.5%). New Zealand (44%), Australia (46.5%) and China (60.1%) have the least number of respondents looking to reduce their discretionary expenditure over the next 12 months.
• Over the 12 months ahead, male counterparts (69%) are less likely to cut back on their discretionary spending as compared to female consumers (71%).
• Younger consumers are less likely to cut back on spend as compared to their older counterparts. 68.1% of consumers aged 30 years and below would cut back on spend, as compared to 71.9% of consumers aged 56 years and above.
• Across the region, Dining and Entertainment is the top discretionary spend priority (59%) for the next 12 months, followed by Fashion and Accessories (46%), Children’s Education² (44%) and Personal Travel (42%). Dining and Entertainment is the top purchasing priority in 11 out of the 14 markets surveyed, with the exception of India, Korea and the Philippines where Children’s Education was top ranked.
• One in three consumers is looking to save more than 20% of their income over the next 12 months. Saving is important to consumers in all markets, especially to the Filipinos (97%), Indonesians (96%), Malaysians (93%), Indians (92%) and Thais (90%). Even China, which was at the lowest end of the list, had 78% of consumers stating that saving was important.

The MasterCard Worldwide Index of Consumer Confidence and MasterCard Worldwide Index of Consumer Purchasing Priorities comprise part of the MasterCard Worldwide Index suite of research products in Asia/Pacific. The other key MasterCard Worldwide Index research products include the MasterCard Worldwide Index of Women’s Advancement, the MasterCard Worldwide Centers of Commerce and the MasterCard Worldwide Emerging Markets Index.

Besides the suite of Indexes put forth by MasterCard, MasterCard also develops Insights reports as part of its series of ongoing research and analysis of business dynamics, financial policies and regulatory activities in the Asia/Pacific region. Sixty-three reports have been produced since 2004.

MasterCard Worldwide advances global commerce by providing a critical economic link among financial institutions, businesses, cardholders and merchants worldwide. As a franchisor, processor and advisor, MasterCard develops and markets payment solutions, processes over 18 billion transactions each year, and provides industry-leading analysis and consulting services to financial institution customers and merchants. Through its family of brands, including MasterCard^®, Maestro^® and Cirrus^®, MasterCard serves consumers and businesses in more than 210 countries and territories. For more information go to http://www.mastercard.com.