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| Version 1 | Version 2 |
|---|---|
| Five ways Australians are spending money | Five ways Australians are spending money |
| (3 months later) | |
| 1. Holding an election is unlikely to make consumers spend more | 1. Holding an election is unlikely to make consumers spend more |
| On Wednesday, the May Retail Sales figures were released showing a mere 0.1% increase in sales. This came off the back of a number of business groups bleating about how the uncertainty of an election date was bad for confidence and the economy. | On Wednesday, the May Retail Sales figures were released showing a mere 0.1% increase in sales. This came off the back of a number of business groups bleating about how the uncertainty of an election date was bad for confidence and the economy. |
| While it must be annoying for some that our democracy gets in the way of their profits, business CEOs had better start finding other reasons for why they are not doing as well as they expected. Elections don’t really seem to faze consumers. In the 11 elections since 1983, seven times the growth in retail sales has been better in the six months before the election than the six months after. | While it must be annoying for some that our democracy gets in the way of their profits, business CEOs had better start finding other reasons for why they are not doing as well as they expected. Elections don’t really seem to faze consumers. In the 11 elections since 1983, seven times the growth in retail sales has been better in the six months before the election than the six months after. |
| It’s even worse if we look at consumer confidence. In the 14 federal elections since 1975, according to the Westpac-Melbourne Institute Index, only three times has consumer confidence grown more in the six months after an election than the six months beforehand (1975, 1998, and 2001). | It’s even worse if we look at consumer confidence. In the 14 federal elections since 1975, according to the Westpac-Melbourne Institute Index, only three times has consumer confidence grown more in the six months after an election than the six months beforehand (1975, 1998, and 2001). |
| The reality is people for the most part keep calm and carry on shopping. Only in very specific areas does the election directly matter – selling a house in Canberra at the moment might be a tough ask given concerns about public service cutbacks, but even there the growth of home loans is not that different to the rest of Australia | The reality is people for the most part keep calm and carry on shopping. Only in very specific areas does the election directly matter – selling a house in Canberra at the moment might be a tough ask given concerns about public service cutbacks, but even there the growth of home loans is not that different to the rest of Australia |
| It seems Australians are pretty well at ease with the whole democracy thing. | It seems Australians are pretty well at ease with the whole democracy thing. |
| 2. We still like cars, but not the cars our parents liked | 2. We still like cars, but not the cars our parents liked |
| In May, for the first time ever, sales of passenger vehicles made up less than 50% of all motor vehicles: | In May, for the first time ever, sales of passenger vehicles made up less than 50% of all motor vehicles: |
| The fall in passenger cars has been due to our new love for Sports Utility Vehicles (SUVs). Ten years ago SUVs made up only 16% of the total market; now it is 30%. Total sales of cars actually achieved a record level at the end of 2012, but not for passenger cars. The problem, of course, is that while sales of cars is a good indicator of economic health, the only locally made SUV is the Ford Territory that means the boom segment of the market isn’t helping car production in our local industry. | The fall in passenger cars has been due to our new love for Sports Utility Vehicles (SUVs). Ten years ago SUVs made up only 16% of the total market; now it is 30%. Total sales of cars actually achieved a record level at the end of 2012, but not for passenger cars. The problem, of course, is that while sales of cars is a good indicator of economic health, the only locally made SUV is the Ford Territory that means the boom segment of the market isn’t helping car production in our local industry. |
| Holden recently announced it wouldn’t bother making an SUV because it wouldn’t be likely to sell enough to make it worth its while. | Holden recently announced it wouldn’t bother making an SUV because it wouldn’t be likely to sell enough to make it worth its while. |
| That’s the local car industry problem in a nutshell – the only type of cars that sells enough to warrant being produced here are passenger cars, but it is the one segment of the market that is shrinking. | That’s the local car industry problem in a nutshell – the only type of cars that sells enough to warrant being produced here are passenger cars, but it is the one segment of the market that is shrinking. |
| 3. For once we’re fixing our home loans when the rates are low | 3. For once we’re fixing our home loans when the rates are low |
| In April, the percentage of home loans taken that were fixed went above 20%. To an extent this isn’t surprising. With interest rates at record lows, it is logical that many people are locking in those rates for a few years. Logical but unusual: | In April, the percentage of home loans taken that were fixed went above 20%. To an extent this isn’t surprising. With interest rates at record lows, it is logical that many people are locking in those rates for a few years. Logical but unusual: |
| In the past, the number of fixed rate mortgages increased when interest rates increased. This sounds sensible – it involves trying to fix in a rate when you think rates will keep going up. But it sees a rate being fixed at the top rather than at the bottom. In March 2008 a quarter home loans taken out were fixed when rates had been rising, but when the GFC hit things went south quick smart. Within 12 months the standard variable home loan rate fell from 9.35% to 5.85%. And that was good time to have a variable home loan. | In the past, the number of fixed rate mortgages increased when interest rates increased. This sounds sensible – it involves trying to fix in a rate when you think rates will keep going up. But it sees a rate being fixed at the top rather than at the bottom. In March 2008 a quarter home loans taken out were fixed when rates had been rising, but when the GFC hit things went south quick smart. Within 12 months the standard variable home loan rate fell from 9.35% to 5.85%. And that was good time to have a variable home loan. |
| 4. We’re still shopping but not stupidly | 4. We’re still shopping but not stupidly |
| For the past two and a half years annual growth in retail sales has been around 3%. | For the past two and a half years annual growth in retail sales has been around 3%. |
| That is the longest period we’ve gone in the past 15 years with such low growth and it shows how different the economy is than prior to the GFC. | That is the longest period we’ve gone in the past 15 years with such low growth and it shows how different the economy is than prior to the GFC. |
| For much of the time from 1998 to 2008 a strong economy meant fairly massive spending. Thus we saw big spending invariably followed by periods where we suffered shopping indigestion, before we headed back to the shops again in big numbers. | For much of the time from 1998 to 2008 a strong economy meant fairly massive spending. Thus we saw big spending invariably followed by periods where we suffered shopping indigestion, before we headed back to the shops again in big numbers. |
| Since 2010 we have largely stayed calm. Our spending is growing, but not absurdly. Sure Gerry Harvey might not like this as much, but it seems to me to be much more stable. | Since 2010 we have largely stayed calm. Our spending is growing, but not absurdly. Sure Gerry Harvey might not like this as much, but it seems to me to be much more stable. |
| 5. We're eating out more than we used to | 5. We're eating out more than we used to |
| Just as we have changed our choice of car, so too do we now shop differently. Twenty years ago we did about 22% of our non-food type shopping in department stores; now only 15% of such shopping is done there. We’ve left Myer and David Jones and headed to JB Hi Fi and Harvey Norman. During the boom retail period of 2000 to 2005 spending in “Household Goods Retailers” grew by around 50%. In contrast spending in department stores grew by only 30% (the worst of all categories). | Just as we have changed our choice of car, so too do we now shop differently. Twenty years ago we did about 22% of our non-food type shopping in department stores; now only 15% of such shopping is done there. We’ve left Myer and David Jones and headed to JB Hi Fi and Harvey Norman. During the boom retail period of 2000 to 2005 spending in “Household Goods Retailers” grew by around 50%. In contrast spending in department stores grew by only 30% (the worst of all categories). |
| In the past five years, department stores have continued to struggle. We actually spent more in such stores in May 2008 than we did in May 2013. However in the past five years, Harvey Norman and other household, electrical and hardware stores have also struggled. So what is the big winner of the past five years? | In the past five years, department stores have continued to struggle. We actually spent more in such stores in May 2008 than we did in May 2013. However in the past five years, Harvey Norman and other household, electrical and hardware stores have also struggled. So what is the big winner of the past five years? |
| Restaurants, cafes and takeaways. | Restaurants, cafes and takeaways. |
| If the period before the GFC was about spending money to spruce up your house or fill it with as many big screen TVs as you had walls, then the past five years have been about spending your disposable income eating out, and (if like me) drinking many, many coffees. | If the period before the GFC was about spending money to spruce up your house or fill it with as many big screen TVs as you had walls, then the past five years have been about spending your disposable income eating out, and (if like me) drinking many, many coffees. |
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