Back in 2008 we had a retail lead “recession” in Australia, as working families in our capital city suburbs saw more and more of their take home pay absorbed by high fuel prices, and high interest rates impacting on their mortgage repayments.
Renters in our inner cities felt the pain as high fuel prices, higher rental payments and also the increasing interest rates made buying a house too expensive.
Well, irrespective of government, it’s all happening again.
According to WA’s Fuelwatch, rather than my own poor memory, fuel prices show a litre of ULP up from $1.17 per litre in May 2009 to $1.28 per litre in May of 2010. It’d be nice to have a national number to call upon easily, but it isn’t, so thank you Fuelwatch. But while we aren’t immune to rising fuel prices, we have been protected a little from them by our strong dollar.
Interest rates are up again, our fifth consecutive rise, not so much due to rising food or clothing or car prices. The strong Aussie dollar and productivity-driven price roll backs by manufacturers and retailers have helped hold – and in many cases lower – prices to shoppers.
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I predicted this in my blog back in January of this year, before Woolworths and Coles announced their roll backs. It had happened in the UK and US and was driven by good business practice – retailers reacting to shoppers’ needs shaped during the tough times in 2008 and 2009.
Interest rates are rising because house prices are up, and this is because we have new Australians (who we need) arriving and needing a place to live. Young buyers who couldn’t afford to buy in 2006, 2007 or 2008 due to high interest rates came into the market because prices dropped, interest rates were low and we had a government stimulus package, as did many other countries around the world. So, mortgage payments are up, and the cost of renting is rising for the same reason as it was in 2008. Plus there is an even greater shortage of new homes due to the building slump in 2008/9. All clear so far?
The latest ABS retail trade figures show that while sales in March rose 0.3%, seasonally adjusted, compared to February 2010 they fell 1.2%.
Sadly, I believe there are more falls to come. Even more sadly, and I am not as bright a person as our economists, I don’t believe it needs to be this way, yet again.
I don’t believe that shoppers need to be “reined in” by interest rate increases from the RBA, dampening our whole economy because many of our state governments won’t release enough land to build enough new homes.
There are only 22 million of us in one of the biggest countries on the planet, yet we have some of the tightest planning laws and highest housing costs in the world. My American colleagues in CROSSMARK, whose homes I have visited, are truly bemused by how much of my lifetime income needs to be spent on a roof over my family’s heads. They earn the same as me, live in beautiful homes and have way more left over for holidays, cars and… shopping.
How dumb must we look to the rest of the developed world? “You just came through one of the worst recessions in living history unscathed, but you haven’t learnt from it and are about to repeat your mistakes only three years later?” It’s like winning the war and losing the peace.
So retailers around the country – corner store to major public company – will be once again cautiously working their way through the balance of the year. This at a time when we should be moving confidently and energetically ahead off the “free kick” we managed to earn during the GFC that has held back most other countries.
As they said in California in the 1850s, “Buy land young man, ‘cos they’re not making it anymore”.
In his role as CEO of CROSSMARK, Kevin Moore looks at the world of retailing from grocery to pharmacy, bottle shops to car dealers, corner store to department stores. In this insightful blog, Kevin covers retail news, ideas, companies and emerging opportunities in Australia, NZ, the US and Europe. His international career in sales and marketing has seen him responsible for business in over 40 countries, which has earned him grey hair and a wealth of expertise in international retailers and brands. CROSSMARK Asia Pacific is Australasia’s largest provider of retail marketing services, consulting to and servicing some of Australasia’s biggest retailers and manufacturers.