Consumer confidence leaps despite flagging sales

Consumer confidence has risen to 124.3 points, its highest level since the RBA’s November interest rate rise.


The latest Roy Morgan Consumer Confidence Rating, based on a survey of 910 Australians, reveals an increase of 2.5 points since December.


According to Roy Morgan, the rise has been driven by Australians’ increased confidence about buying major household items, with 65% of survey respondents believing now is a good time to buy.


This is compared with just 10% of respondents who believe now is a bad time to buy, which Roy Morgan describes as a “major plus” for retailers in the post-Christmas sales period.


Roy Morgan executive chairman Gary Morgan says 65% is the highest recorded figure for this measure since the start of the new millennium.


“[This figure] should encourage retailers who have recently complained about the impact of online sales on their bottom line,” Morgan says.


However, the Australian Bureau of Statistics’ November Retail Trade figures reveal declining sales for clothing, footwear and department store retailers when compared to the same time in 2009.


ARA executive director Russell Zimmerman says the news is disappointing for retailers, who were expecting some early Christmas shoppers in late November.


“This declining trade at the beginning of the Christmas trading period helps to explain why retailers began very heavily discounting in early December to move stock before the traditional post-Christmas sales,” he says.


“The Australian retail sector is the country’s largest employer and it’s still suffering in the wake of the GFC while other sectors have recovered.”


“Retailers are dealing with a new type of consumer who is frugal and holding onto spare cash for savings or to pay off debt, and a steady hand on interest rates is needed for the moment to ensure ongoing retail profitability in 2011.”


Both Zimmerman and Morgan say the Queensland floods will exacerbate the situation for retailers, particularly those selling discretionary items, as consumers reign in their spending even further.


Morgan says in addition to slow sales, Australian businesses face the prospect of having to hire unskilled workers, most notably school leavers.


“Australia faces three other major problems, the first being the mining boom, which the majority of Australians aren’t involved in. How do you get the rest of Australia involved?” he says.


“Secondly, the government is controlled by the unions, which have no ideas how a workplace operates. The whole of the small business retail sector is becoming a cash economy.”


“The government knows about it but they turn a blind eye. There should be tougher fines and [increased] penalties for people who are breaking the law.”


“Thirdly, inflexible work practices are crippling businesses, particularly in the construction industry with so many rostered days off, holidays, etc.”


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