The world banking system is about to be tested once again by another European crisis because politicians and central bankers underestimated the power of people. And here in Australia we have a version of the “Greek game” being played under the surface.
In Europe whether they be Greek, French or Spanish, twenty first century Europeans will only suffer German imposed austerity for a limited period. The Greek crisis will be the trigger for the euro to be used by fewer countries. Bankers will suffer big losses because they underestimated people power and did not understand that in long term you can’t have a common currency operating in vastly different economies.
The Greek crisis gains the headlines but deep down there is a global consumer nervousness sweeping the western world. Australian consumers are as nervous about the future as those in Europe or the US. Among the major developed countries around half of consumers feel they are in financial trouble or not financially secure.
Fascinatingly, Chinese consumers feel the most secure. Enlarge the graph below and you will be fascinated by the trends that emerge.
Forty seven per cent of Australian consumers feel they are in financial trouble or not financially secure, up from 36% in 2011.
Australians, along with Germans, share the “honour” of having the biggest rise in the number of consumers who feel they are in financial trouble or not financially secure. In Australia the number rose a whopping 11% from 36 to 47%.
Australians are affected by the European crisis because it boosts the cost of our wholesale overseas borrowing by banks. But we also have our version of the Greek disease. Like the Greeks, we allowed our worker productivity to fall dramatically and we then were handed a high dollar courtesy of the mining investment boom. (The Greeks got a high euro). But then our Canberra crazies dreamed up a carbon tax to further boost the cost of Australian goods and services and then sprayed money to lower income people while squeezing middle income Australia. (Federal Budget 2012: Ripping into middle Australia, May 8). Just as the Greek politicians are being taught by their people, so will Australian politicians who do silly things be taught a lesson.
This lack of job security is causing a dramatic change in Australian spending habits and I think the change is going to be with us for the medium term so businesses better get used to it.
For example the percentage of Australian consumers saying they will spend less on discretionary items in the next year increased from 47% in 2011 to 50% in 2012. This is higher than in the US (46%), the UK (47%) and about level of the average of the major European economies surveyed.
In other words Australians are saving.
But they are also changing the way they are spending and are increasingly seeking and expecting special offers. They are using the internet to compare prices and are increasingly shopping overseas.
I have taken out the graph of Australian internet shopping as a reminder to all those who own shopping centres –your world is being turned upside down so you had better change your ways including lowering exorbitant rents. This particularly applies to those aiming at higher income consumer markets.
Just as a batch of new politicians will not be able to ease the Greek misery, so this switch to the internet is going to gather even more momentum.
Footnote: The Boston Consulting Group’s annual Consumer Sentiment Survey was conducted in April and covered 15,000 consumers in 16 countries. The survey included more than 1,400 consumers in Australia.
*This article was first published at Business Spectator.
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