Early evidence is suggesting a lively tussle in consumers’ minds between caution about economic prospects and a longing for a good time – especially in Australia
The great economist John Maynard Keynes recognised early on in his career that no rational economic model could do justice to human behaviour. Instead, he advocated a level of human understanding in economic planning that went beyond the purely cost-benefit and incorporated such factors as ‘animal spirits’ in their decision-making.
In The General Theory of Employment, Interest and Money, he wrote: ‘If human nature felt no temptation to take a chance, no satisfaction (profit apart) in constructing a factory, a railway, a mine or a farm, there might not be much investment merely as a result of cold calculation’. In other words, we do things not necessarily because they are rational, but because we want to do something that interests us and makes us happy beyond monetary comforts.
If Keynes was alive today, he would be a busy man. The IMF, along with governments around the world, are beginning to grasp the deep economic hole they find themselves in as a result of the global shutdown to combat coronavirus, and wonder how they are going to rekindle those ‘animal spirits’ to get economies moving again. Faced with forecast economic contractions for 2020 of 10% or more – a decline on the scale of the Great Depression of the 1930s – and mass unemployment in developed and developing world alike, finance ministers and business leaders have their work cut out to think positively.
The issue of hope versus fear goes to the heart of the study of human behaviour. Studies in recent years have focused on why we can maintain contradictory concepts in our head at the same time – part of our unique evolutionary ability for cognitive dissonance. In his excellent book, Sapiens, historian Yuval Noah Hariri argues quite persuasively that this ability is central to our progress as a species. Other studies have shown that we can be pessimistic for the future of society as a whole while at the same time optimistic about our own progress within that society. One particularly interesting study from NYU suggests some empirical truth in the old adage that you can think yourself into a better future through positive visualisation, and vice versa.
Such thoughts have been running around my head ever since we started getting in the results of a suite of new questions we designed for our global wine consumer survey, Vinitrac®. For context, Wine Intelligence has embarked on an ambitious programme of new special reports about consumer behaviour in the era of the virus, plus updating existing country Landscape reports. We have collected new data about consumer wine drinking during stay-at-home restrictions, plus questions about what people might do once the lockdown is over.
For example, Australian wine consumers appear to be moderating their wine consumption, slightly, but this varies a lot by age group, and there appears to be new occasions for in home wine consumption to replace those lost going-out occasions. More intriguing still, Australians appear quite bullish about what they’re going to do once the virus-related restrictions ease: 43% say they will be more likely to host a party, while 13% they will be less likely to do so.
One of the most closely-watched data points will be whether consumers feel confident enough to travel again, given the reliance on tourism income for many wine industries and economies generally around the world. The initial data from our Australian survey shows positive signs for leisure travel. When asked about their plans to vacation abroad once lockdown is over, 46% of monthly wine drinkers in Australia said they would be more likely to do so than before, versus 16% saying less likely. It’s possible that the Australians, with such a strong cultural history of travel, will emerge as outliers in the general pattern. Many tourism operations will be hoping otherwise.
When asked about priorities further ahead in the future, Australians are showing more caution. The data is suggesting larger financial commitments such as house and car purchases are less of a priority, along with travelling for business, whilst the biggest increase in priority appears to be saving money.
It may be too soon to draw aggressive conclusions from one country, and before we see the end of a lockdown period and can better assess the economic implications. A recent study from McKinsey suggests that consumer sentiment is showing a lot of divergence between regions. Asia and Australia appear most confident, followed by the US, with European countries showing least consumer confidence. This may be reflecting cultural biases or even just where those nations are in the virus cycle – it’s too soon to say.
The full Wine Intelligence Australia Landscapes 2020 Update: COVID-19 Impact report will be published within the next two weeks. To enquire about purchasing, please contact Courtney Abernathy.