The ABS has today released data showing Australian Retail Sales have fallen a seasonally adjusted 0.5 percent in the month of March. The fall has come as a surprise to many economists who had expected sales to actually increase 0.5 percent.
In early April, we reported on the Net Savings Ratio which has sprung back to levels not seen in 25 years. At the time we wrote “Something has scared consumers and with such a rapid change in household savings, this could suggest there is a lot more pain ahead in terms of retail spending (and GST collection.)”. We can’t really say today’s figures are much of a surprise to us.
» Surprise drop in retail sales – Sydney Morning Herald, 5th May 2011.
» Shoppers keep tightening purse strings – Adelaide Now, 5th May 2011.
» Discretionary spending falters at expense of housing bubble – Who Crashed the Economy, 13th February 2011.
I have a resonable job yet I’ve never felt so poor as I have in the last few years due to rapid increase in housing costs.
Not surprising and I will expect this gets worse over the course of the year. Mortgage holders are so much in dept that they won’t buy unless things are on sale. I expect pricing to get aggressive in the retail sector as people have less money left over after paying mortgage costs and factoring in the substantial increases in Utility & Private health costs, people are going to find in tough indeed.
The Aussie economy is on a steady decline and this is just the beginning.
We all know housing prices are over the top and frankly not worth what they are asking. Housing correction can only build this nation. Build a family, build a nation. Destroy a family destroy a nation.
When cost out way savings (money in the bank) a recession is inevitable. Strong economics raise interest rates and increase savings. This we need to do, many will be hurt as to the cost of there massive borrowing. House prices will fall and the end result will increase retail spending which is the engine room of our economy. Putting all your money into a mortgage will kill this economy. Healthy economies operate as a circle. If they behave in a straight line, as we are, it will run out of steam and eventually slow down. No doubt many will be hurt but more will be hurt if housing prices do not go back some what 30-40%.
If you think back to the 70’s house prices were comparatively cheaper – a great benefit to consumers and retailers. The change in prices relative to incomes has really only benefitted banks because they can lend more $$.
Examining gov’t policy one can see many “initiatives” which have pushed prices higher – negative gearing rort, first home ‘vendor’s schemes’, competition in banking, covered bonds to come, inflation of the AUD, etc.
When the gov’ts faux criticism of banks ends and some monetary and fiscal austerity starts, John Moussa will be correct. Otherwise banks here, similar to the USA, end up owning the country as well as owning most of the pollies.
Go to any electronics retailer in Aus. Most items you see for around $500 – $600 (digicams, netbooks etc) you can find on ebay for $300 – $400 from Hong Kong – free shipping too.
Coincidentally, I see houses listed for $600,000 that are worth no more than $400,000 max.
Prices for just about everything here are ridiculous. The thing about ridiculous prices is – people won’t pay them…
Simple, we have too much retail. The weak businesses will close and find something else to do. Go work for Julia and Wayne – they are creating a massive government sector.
The USA had too much retail consumption and its a total trainwreck now.
Australia is no different.
Or maybe they slash rates to pump it all up again. That might also help tourism and retail at the same time.
Gather ’round for story time:
A trip to CostCo took place yesterday. The shiny TV’s caught my eye. Now, I’m NOT REALLY in the market for one. My 15yr old CRT telly is still going strong. But you know, its nice to day dream. So I snapped a couple of reference pics of the prices and model codes for comparison. Curiosity got the better of me so I later went to JBHiFi and did the comparison. $1699 versus $2099 for the same whizz bang unit. Sales rep came up and I was quick to state I was not in the market nor buying. However I also showed the photo of CostCo’s price. The calculator came out and he was pretty quick to say “Yeah we can match that!”. $400 discount – a sign of retail desperation?
HousingTroll…JB HIFi has been doing this for years. I hope its not the first time you’ve asked for a discount there.
Down here in Soath Coast NSW the White Goods market has all but died, and acc. to our local Washing Machine Repair chap, his (formerly large-ish) stock of reconditioned appliances (Washing Machines and Fridges) has dwindled to the stage that he now has a “waiting list” of customers! Rather than the “throw-away” society of bygone years (and only a few years ago at that!), we’re now seeing a “repair it at all costs” mentality, and people who would have NEVER considered “Second-Hand” are evidently queuing up for “pre-loved” appliances.
Despite all the very vigorous ad. campaigns and heavy discounting, people have stopped buying new simply because they can no longer afford to. Retail is dying, taking with it all the direct, and indirect jobs associated with servicing a retail-led economy. This situation was – and it’s continuing evolution is – entirely predictable, and again demonstrates very clearly that things are NOT “Different over here”, despite the assertions of those for whom “living the high life” is very dependent on preaching the opposite “reality”.
Gather