Along with pensioners, Newstart recipients and low-income earners, the Morrison Government has now abandoned retailers. Alan Austin reports.
HOG'S BREATH steakhouses are the latest Australian eateries to close some of their retail outlets. Surviving cafes, restaurants and takeaway food companies are under severe stress. As is most of the retail industry.
Why? Because Australian citizens no longer have the discretionary spending power they have long enjoyed. That this is happening during an extraordinary worldwide boom in investment, jobs, growth and profits is a damning indictment of the Morrison Government’s economic management. Another one.
The dismal data
The monthly rise in retail turnover in June 2019 over June the year before was just 2.68%, one of the lowest on record. The average rise, June over June, through the 36 years for which the ABS has data, is 5.8%.
Turnover for the full 12 months of the financial year 2018-19 was $325.4 billion. This sounds a lot, but it isn’t really. It is an increase of only $9.6 billion, or 3.04% over the previous year. Given population increased 1.77% and inflation is 1.6%, that is a decline in turnover in real dollars, relative to population.
Historic low in Australia
This year’s result is only fractionally above last year’s abysmal 2.56%, the worst outcome ever. The year before that was just 3.13%. So for three consecutive years, the growth in retail sales has been below 3.2% and thus below the natural increase in population and prices. The only time in 36 years.
The average growth for the 30 years prior to this hapless administration taking charge is 6.10%.
The monthly June on June result of 2.68% can be compared with the rest of the world at tradingeconomics.com. Australia today is nowhere near the leaders, where it has always been under previous governments. It now ranks 16th among the 35 comparable wealthy, developed OECD economies.
The only retail segment to advance over the last financial year was pharmaceuticals and cosmetics. Those that just managed to break even were supermarkets and groceries, food and clothing. Segments which went backwards marginally included liquor, restaurants and cafes, takeaway food, footwear and personal accessories, hardware, building and gardening. Disastrous downturns were experienced by department stores, furniture, textiles, electrical and electronic products, household goods, newspapers and books and recreational goods.
The financial year just ended was the worst on record for recreational goods, tumbling 3.56% over the year. There have been occasional negative years before, but this was the worst.
The Australian Financial Review continued to spare the Morrison Government any embarrassment by focusing on the month on month figures – that is, June over May – which bounce around so much as to be virtually useless. Yes, 0.4% month over month, this month looks okay. But last month, it was only 0.09% and it was negative 0.07% the month before. So it's a bit selective.
ABC News found good news for the industry by also taking just the month on month figure and comparing it with those marvellous mythical magical “expectations”. The number was better than expected, so well done! Aunty does not say who did the expecting.
Missing the global boom
The reason retailers are down the S-bend is starkly obvious to those not spruiking the Coalition’s narrative and concealing its failures. The majority of Australians no longer have the discretionary spending power of previous periods. This is the inevitable result of shifting wealth and income from low and middle-income earners to the rich and, particularly, the mega-rich who stash their wealth offshore.
It must be a supreme irony to observers abroad that this is happening in Australia, which during the global financial crisis showed the world how to build a vibrant economy. The Rudd Government in 2009 shifted income to the majority of consumers which immediately boosted retail spending. This then flowed through to the rest of the economy enabling Australia, alone in the developed world, to avert recession and widespread job losses.
It is worth noting that the jump in retail sales occurred when the stimulus payments were received, rather than when they were announced in October ... This pattern of behaviour also fits with international evidence that consumer spending tends to rise on receipt of windfall income gains, rather than when consumers became aware that they will receive such windfalls.
“To say that restaurant closures can’t be blamed on a downturn in the economy is contrary to every report that I’ve read over the past 18 months. It’s unquestionably the toughest environment we’ve seen in our 30-year history.”
The way forward
Most developed economies today ensure their citizens have adequate spending power through progressive welfare, wage and tax policies. The minority of economies that have shifted wealth and income to the rich have seen their retail sectors suffer and the overall economy decline with this wealth. These include the USA, Italy, Hungary, Serbia and, bizarrely, Australia.
The solution is for the Morrison Government to reverse its current policy settings by increasing welfare payments, encouraging wage rises for low-income earners and shifting the tax burden back towards the top end.
Will they do this? Highly unlikely. So the tough environment for retailers will likely continue.
It’s enough to knock the breath out of the sturdiest hog.
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