Remember when the government’s tax refunds were all that were needed to fix Australia’s economic malaise? How it was going to be 2008 all over again, as grateful taxpayers celebrated a Coalition election win by spending their refund cheques? As last week’s August retail sales figures show, that isn’t the case at all — not nationally, and particularly not in NSW.
In fact, consumers in Scott Morrison’s home state have been refusing to open their wallets for some time, particularly since the February-March period of this year. As Crikey has pointed out a couple of times this year, retail sales have been flat or declining in the premier state since August 2018 (when Morrison knifed Malcolm Turnbull), despite a brief pick-up in February and March. Last week’s figures showed NSW sales rising 0.3% in August in seasonally adjusted terms and flat in trend terms. Over the year to August they rose just 0.3% in NSW in trend terms compared to a 2.3% rise in sales nationally.
NSW consumers face the same challenges as Australians elsewhere: the consequences of the government’s wage stagnation policy, weak house prices and high debt. But something else is eating away at people in NSW and it’s not clear what. There was a state election in March, right before the May federal election. Double Coalition wins (both narrow) seem to have provided no bounce whatsoever, nor have successive interest rate cuts — even though they appear to have helped stabilise or boost house prices, at least at the top end of the market.
It’s the actual dollar amounts that reveal just how bad retailing in NSW has become. In August, retail sales in NSW totalled $8.748 billion seasonally adjusted — that was up just $31 million from July. NSW retail actually peaked at $8.749 billion in February and March this year — August’s sales are still $1.5 million under that.
This is on top of national retail weakness. Retail sales are the best indicator of consumer spending and confidence and they are going nowhere as consumers refuse to spend. Nationally, retail sales rose 0.4% (seasonally adjusted) in August after being flat in June and July. This was thanks to a 1.9% rise in sales of clothing and footwear and a modest rise in sales in the heavily depressed department store sector, where major chains David Jones, Myer, Kmart and Target are all struggling and experiencing falling sales. In trend terms, growth was just 0.1%. Separately, car sales nationally and across the states have also fallen for 18 months and are down 7.9% so far in 2019.
Barring some miracle turnaround in spending, the Reserve Bank’s estimate of a 0.6% boost to aggregate household incomes from the government’s tax refunds looks unlikely to go beyond household savings accounts or increased mortgage repayments as consumers hunker down.
That, in turn, is bad news for retail sector employment: in the three months to August, retail shed nearly 14,000 jobs. In the year to August, it added a net total of 10,000 jobs, but much of that was last summer. Retail, our second biggest employer, is shrinking as a proportion of the workforce, despite the government’s solitary stimulatory policy of any note being aimed directly at it.
Worse, that’s happening at the same time that our third largest employer, construction, is contracting. The Australian Industry Group’s (AIG) Performance of Construction Index out this morning showed that the sector is in sharp decline, continuing thirteen consecutive months of contraction. The sector has shed around 9000 jobs (seasonally adjusted) in net terms in the year to August and, according to the AIG, “construction employment continued to decline in September”.
Maybe Scott Morrison should spend less time playing statesman in foreign capitals and more time in his home town, trying to get his fellow Sydneysiders to open their wallets — or at least trying to find out why they seem to be particularly averse to spending ever since he became prime minister.
The Australian economy does not rise and fall on citzens buying shiny things they don’t need. It rises and will fall on a housing bubble that exposes the Australian economy to the whims of Wall Street and London banks.
Government legislation is already being slipped through the backdoor to bail out the big four banks and their smaller mortgage lending clones when the bubble bursts; as it surely will in the new year when mortgage lending standards will be lowered even further and more Australians start defaulting on their massively over-inflated mortgage repayments due to weaker and weaker purchasing power of the Australian dollar.
The other component of our economy is holes in the ground. Australia opens the doors for foreign extraction of our rich mineral reserves at mates rates or for free. Just look at Chevron.
The only reason our economy has lasted as long as it has without a complete meltdown is due to luck and the Chinese government continuing to prop up our economy by actually paying the Australian government for what we trade with them.
Will Australians get angry at the people who hold the real power, who have systematically dismantled our real economy at the behest of our US and UK allies? Or will they do as they’re told and get angry at the poorest and most powerless Australians? I guess we’ll be finding out soon.
Australia needs massive economic reform, but it won’t happen until the Australian public wake up to the fact that Australia is a colony that serves the interests of central bankers and foreign corporate interests. Our current crop of politicians are far removed from a truly visionary and brave leader like Gough Whitlam.
At least South Australia appears to be trying; as they provide incentives for decentralised power and a renewable energy future. Sideline the taxpayer subsidised fossil fuel energy monopoly and Australians can start paying the 1 cent a kilowatt hour decentralised solar energy costs already being realised in other parts of the world.
I think you’ve nailed it Bones. Thanks.
The LNP has a clear vision for Australia. A sliver of the population – maybe 0.5% – will be wealthy beyond the dreams of avarice. The remainder of the population will be chattels of the 0.5% elite: indentured servants or slaves. The entire country will consist of mines owned by three or four mining companies or mega-farms, perhaps each one as big as a state. Everything, both mining and agriculture, will belong to foreign interests. The country itself will either be clear-felled agriculture or open cut mining.
The 0.5% will represent all of the values of the Liberal party: freedom, wealth and power. The rest will have nothing.
Work on converting the nation to this model has already commenced. Various drafts of contributory legislation are currently before parliament.
Why on earth would the two elections provide any bounce? No one voted for the LNP because they wanted them. The NSW government are corrupt and incompetent, captives of the development and mining lobbies and the Federals are just a blundering collection of nincompoops besotted by religious bullshit, racism and bashing the poor.
This last election result has been the most upsetting ever, gawd knows where this morrison mob will lead us. Why did you vote for them?
Is it not worrisome that avoiding recession is dependent on all us nobodies buying more shit we don’t need, presumably with debt we can’t afford? Consumerism is indeed consuming the environment. When will our leaders step up with some innovative thinking about what prosperity can be in a no-growth economy. It is only the planet that depends on it.
The article and replies make me wonder about the general quality of analysis. Are we really dependent on each other buying more stuff. Can someone make up their mind about house prices. Low prices apparently make us feel bad and not spend. High prices make us feel bad because they take all our money. Elsewhere we seem to be more sensible and understand that low prices are good for consumers. Ok houses are nominally assets but overpriced assets are in no ones long term interests.
As I’ve said before, bring back the right to strike if you want ordinary folk to have more money.