See, Malcolm, Government stimulus packages do work. In data out this morning, retail sales surged 3.8% in December, seasonally adjusted, as the Federal Government’s pre-Christmas handout was eagerly spent.
Helped also by cheaper petrol prices and 3% in interest rates cuts, Australian consumers spent a record $19.2 billion in December, the biggest splurge in eight years.
The ABS said the “seasonally adjusted estimate increased by 3.8% in December 2008. This follows increases of 0.4% in November and 1.0% in October 2008.”
The Bureau said the monthly rise was so great that it was forced to suspend its sales trend series until they settle down. It was the biggest monthly rise since the post GST surge in August, 2000. They key point to watch for now is how long the surge remains in the system.
No doubt some will claim that we don’t need another $12.7 billion in one-off payments handed out over the next couple of months. Malcolm and the Federal Opposition appear not to think so. I wonder what Australian retailers are going to be telling him, and the hundreds of thousands of people they employ.
The December package was worth $10.4 billion, but some of that was in increased grants for first home buyers and new home buyers. Building approval figures out today revealed little impact from this for the month because the grants were only started to be paid then. The housing finance figures for December are due next Wednesday and should show a pick up, as the November figures did.
If there is an afterglow that lingers in the sales figures beyond January, then the $8.7 billion of transfers to lower income people and pensioners in December will have worked.
If anything the numbers reinforce the strong suggestion that Australia hasn’t been as badly hurt, as yet, by the global crunch and slowdown. Retail sales in the US and Japan fell in December.
The figures also confirm what RBA Governor, Glenn Stevens said yesterday in his statement accompanying the central bank’s 1% rate cut: “Economic conditions in Australia have also been affected, though less than in other advanced economies. Australia’s financial system remains in a strong condition and large interest rate reductions over recent months have been passed through in substantial measure to end borrowers.”
Figures from the Australian Bureau of Statistics this morning containing the re-instated seasonally adjusted retail trade series, reveal the surge, which was spread across most sectors.
The ABS said that in seasonally adjusted terms, all industries had an increase in December 2008, with food retailing (+1.4%), department stores (+8.3%), clothing and soft good retailing (+5.8%), household good retailing (+9.9%), Other retailing (+2.6%) and cafes, restaurants and takeaway food services (+1.7%).
And, according to the ABS, retail sales rose the most in sluggish NSW where they were up 4.9%, in seasonally adjusted terms.
The ABS said all states experienced a similar surge. After NSW, Victoria was up 3.9%, Queensland 3.2%, South Australia 2.4%, Western Australia 2.8%, Tasmania 4.2%, Northern Territory 4.8% and Australian Capital Territory 3.0%.
December is normally the best time of the year for retailers and spending rises, but thanks to the package, spending last December.
The Bureau said that “in original terms, Australian turnover increased by 29.0% in December 2008 compared with November 2008. Chains and other large retailers increased by 34.0% while the estimate for ‘smaller’ retailers increased by 20.1%. Australian turnover increased by 5.7% in December 2008 compared with December 2007. Chains and other large retailers increased by 8.7% while the estimate for ‘smaller’ retailers increased by 0.3%.”
So far, the country’s biggest retailer Woolworths, has reported solid sales for the first half of the year, including December. Its Big W general merchandise chain lifted same store sales by 6.4%, its consumer electronics business, by 6.9% while in Food and Liquor, same store sales were up a strong 7.1%.
Harvey Norman hasn’t yet produced a set of Australia-only figures, but the company battled negative sales growth for much of the last quarter, with a turnaround only evident in early December. Harvey Norman yesterday revealed that it was closing its new five store OFIS chain which was set up to take on Officeworks, now controlled by Wesfarmers. That will cost Harvey Norman up to $8 million.
And David Jones today confirmed today that first half sales fell 6.5% on the same period of the 2008 financial year. First half sales totalled $1.06 million compared to $1.14 million in the first half of fiscal 2008, with second quarter sales off 6.6% to $619.9 million from $664 million the previous year. First half sales on a comparable store basis fell 7.9%, but were down a massive 9.2% in the December quarter.
Clearly Santa and the bonus didn’t call at DJs in December, but it was clearly the exception rather than the rule.
To note Turnbull seems to have sought to meet the thrust of this article by arguing $9 billion plus of the $10 billion stimulus mark I as per his second question in parliament today.
Rudd went on a rhetorical and yes as BK has said ruthless baseball bat style attack. But he didn’t answer the claim of the unaccounted for money not showing up in the retail increased expenditure. A very fair debating point.
I just didn’t find the ALP answer in parliament convincing. The politics might be smart but are they valid? My guess Gerry Harvey is still right about the systemic downturn in the retail sector. My feeling is if it was good for his business he would be all over it like a rash, conservative or not.
Hockey also got up and mentioned that 90% of NAB credit card holders are paying down their debt rather than just their monthly balance, to say they are arguably saving as much as they are spending. Another fair point I think that Stimulus mark I is not a clear slam dunk at all.
Two points.
This is simplistic analysis. Using the compare between our retail sales levels and the US/Japan figures as support for the stimulus is misleading. It could be credibly explained by the US/Japan being more advanced in their contraction cycle than we are. This view is supported by our reliance on commodity exports and the effects of commodity price reduction being in the early stages of flowing through our economy.
This leads to point 2.
Preserving retail and related jobs through December and March/April debt funded government stimulation will do no-one any favours in the second half of 09 if we move at that time to where the US/Japan/Europe is right now. This scenario is very possible and if it eventuates all the above handouts of approx $20b+ will have achieved very little (except perhaps encourage a retail worker to take advantage of the first home buyer subsidy, gear up, and then find that retail figures for Q3 09 lead to mass layoffs in the sector).
As the private sector has found, sources of debt are not finite and this applies to the public sector. If the ALP is going to use further debt to save us from our earlier debt binge they should pace themselves, otherwise they’ll end up like their 1972-1975 colleagues.
I wonder what Gerry Harvey will say now about the stimulus package?
Perhaps he should avoid pontificating and stick to retailing? Sounds like his stores need a supersalesman to help them catch up with the competition!
err my first sentence should have read …
To note Turnbull seems to have sought to meet the thrust of this article by arguing $9 billion plus of the $10 billion stimulus mark I HAS NOT REALLY BEEN ACCOUNTED FOR YET as per his second question in parliament today.