Ominous signs at Australia’s shops

Did Australians spend enough money on Christmas to save the economy and keep us all from losing our jobs?

Here's hoping - but there are reasons to be worried.

December 24 filled me with concern. I waited until Christmas Eve to do my present shopping and can report David Jones in Melbourne's CBD was not packed at all.

I bought mum some salt and pepper grinders and as I rode the escalators up and down, there were more staff than customers in several sections of the department store.

Then I stopped for a snack at the food court at the Melbourne Emporium. It was only five per cent full.

I couldn't stop worrying about all the employees standing at the various outlets doing nothing. Are they still going to have jobs soon? Are any of us?

Prime Minister Scott Morrison had been begging people to spend.

"Get shopping for Christmas!" he said on the December 23. But the next day, it seemed like nobody was listening.

This matters a great deal - it could determine whether you have a good or bad 2019.

BOXING DAY RECOVERY?

Luckily Boxing Day sales seem to be a bit healthier.

The early word is it was old-school levels of busy out there, with huge lines for parking at shopping centres and people camping out over night to get into Myer.

This could be a good sign.

 

If the traffic jams were anything to go by, the Boxing Day sales brought shoppers out in droves. Picture: Glenn Hampson
If the traffic jams were anything to go by, the Boxing Day sales brought shoppers out in droves. Picture: Glenn Hampson

 

And of course visual inspection is not enough any more to judge retail. There are companies that try to judge how big retail sales have been by looking at satellite images of shopping centre carparks.

Their job is made harder these days because we buy a lot online.

Retailers know exactly how much people are spending online but they won't announce that to the rest of us until next year.

Online retailers have also been smart by spreading out the big spending splurge with their Black Friday sales in late November.

Many people probably get organised much earlier than I do and start their Christmas shopping in November.

 

We won’t know how busy the pre-Christmas retail trade was until February. Picture: AAP
We won’t know how busy the pre-Christmas retail trade was until February. Picture: AAP

 

But we won't know about November sales for a while yet either. The Australian Bureau of Statistics has a lag with retail data. They won't tell us November's results until January 11.

We have to wait until February to find out about December.

This is the problem with almost all economic data - it is backward looking. It tells us what the economy did in the past - not what it will do next.

 

WILL YOU SPEND UP BIG IN 2019?

What Aussie consumers will do next is a concern. Do we feel rich enough to go on a spree?

The really good news is employment. The Australian economy put another 37000 people in work in November.

Unemployment is at just 5.1 per cent and more and more people are in the market for a job. The employment-to-population ratio is 62.3 per cent - the highest it has been in eight years.

A strong jobs market should help prop up the consumer economy - people who have jobs spend money.

But the strong employment figures are just about the only bright spot for retailers. A lot of other trends suggest we might be getting more fearful in 2019.

 

How much Aussies spend has a big impact on Australia’s future prospects — and your job security. Picture: Annette Dew
How much Aussies spend has a big impact on Australia’s future prospects — and your job security. Picture: Annette Dew

 

The construction industry is still going strong. But eventually the current crop of new building projects will finish and we will need new ones to replace them.

The softer the housing market gets, the fewer new projects there will be. So the future of employment in construction is quite uncertain.

The 'wealth effect' is also likely to make people spend less in 2019. Falling house values and falling stock markets are slashing people's net worth - that flows through to lower spending.

 

A SPECIAL MENTION FOR FALLING STOCK MARKETS

On Christmas night - when Santa was busy delivering presents in Australia - it was still Christmas Eve in America.

And there was a lump of coal for everybody who cares about stock markets, which should be all of us!

US stocks fell three per cent, taking the total plunge since the peak to almost 20 per cent. Japanese stocks also fell sharply - by five per cent in just one day.

The markets are sending a signal, and it is not a positive one.

A recession is looking more and more likely in America. We may not follow them down the slippery slope into full-blown recession, but Australian growth won't be helped by American weakness.

After all, China's appetite for our exports is partly driven by American desire for their exports. It flows through.

 

A NEW CRISIS BREWING?

Australian economic confidence also can't be helped by the fact that a brand-new building in Sydney had to be evacuated on Christmas Eve over concerns it could collapse.

According to an expert who spoke to consumer advocates Choice, building quality tends to be the opposite of how busy the building industry is.

When the building industry is run off its feet, quality suffers. If that is true, we should worry about the many tall apartment buildings that have gone up in recent years.

 

Opal Tower residents heard cracking noises coming from the building, leading to its Christmas Eve evacuation.
Opal Tower residents heard cracking noises coming from the building, leading to its Christmas Eve evacuation.

 

How much confidence can buyers of new apartments have now?

We need to hope the Opal situation is a one-off. The Sydney site where it is built used to be a wetland. It could be a special case.

If new apartments can be deemed too dangerous to live in, banks may get nervous about financing apartment purchases. That could spread price falls from more expensive houses - where it has been mostly focused so far - onto units as well.

The more widespread the dwelling price falls, the bigger the impact on the consumer economy.

We already have plenty of reasons to spend less. We have to hope the economy comes up with reasons that convince us to spend more.

 

Jason Murphy is an economist and freelance journalist. He writes the blog Thomas the Think Engine | @jasonmurphy


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