Hillary was still optimistic about the government’s chances until this week when the disastrous Coles Myer result turned her bearish.

For the six-months to the end of January, Coles Myer’s profit after tax and abnormal items dropped to $196 million. That compared to $295 million in the previous corresponding period a drop of some 33 per cent.

Coles Myer says the introduction of the GST adversely affected both sales and margins during the half-year, especially for clothes.

And thats where the danger to both John Howard and the Australian economy lies.

The GST process has been full of sleepers as the Government learned with the BAS.

However, businesses large and small have a whole range of well connected peak groups and lobbyists they can use to push their case. Joe and Joylene Punter only have the ballot box.

When the GST was introduced, no-one noticed much difference in their day to day shopping at the supermarket fresh food was GST free and the whole swings and roundabouts affect of sales tax versus GST on other grocery items meant that shopping trolleys stayed around the same price. However, since then, the impact of the GST on other necessities of life has hit home.

First there were the utility bills that came in at the end of September. Then there has been the GST charges on items like insurance. Clothes have noticeably increased in price. We all spent up over the Olympics and Christmas anyway. It was party time. But with the accounts are all now in and the kids equipped for back to school, Joe and Joylene have noticed just what everything is costing them.

The situation hasnt been helped by the dollar heading south. Suddenly, everything is costing more and were spending less.

This weeks consumer confidence figures gave the statistical illustration of whats happening. The Coles Myer profit result shows what this means in the real world. And if Coles Myer are doing it tough, then a hell of a lot of other businesses the vast majority in a more vulnerable position are doing it tough as well.

If were spending less on necessities such clothes, whats happening with our spending on services and incidentals? And what does that mean for the economy.

The sleepers are awakening to to to to a recession we had to have.

The PM’s office might as well start the shredding now.


And this was Hillary’s view only a few days earlier. How quickly the world changes.

Settle down everybody

One swallow does not a summer make, one quarter a recession, one poll an election result you get the drift. So will you all please quieten down. Can we have a little perspective, please.

Hands up who remembers this big opinion piece that appeared in the Fin in around August 1992 that said all the experts had given up on Keating. Hillarys sure the author does. And what happened six months later? Right.

Anyone who keeps and eye on the Morgan polls will know that they have consistently put Labor in the lead. The two parties tied at 41.5 per cent back in early August last year and on 42 per cent in early February 1999, but the only previous time the Coalition opened a lead over the ALP was in the second half of that month and then it was all of a massive one per cent.

In fact, since the 1998 election where the Government got home despite winning fewer primary and two party preferred votes than Labor Morgan has put the ALP ahead on all bar these three occasions. And if we really want to be pedantic, we should also remember that in early August 1998 two months out from the poll Morgan gave the Government 30.5 per cent compared to Labors 44 per cent.

Once again, for the record, Hillary thinks the Government will lose the next election but it might be an idea to wait for it to be called before stating what the detail will be.

The Windbag from the West hasnt got any coherent policies. Writing Kim Beazleys plan for Australia down the side of the bus he used for his New South Wales tour is as close as he has got.

And a recession? Well, as Hillary observed last week, economic management has been the Government’s strong suit. The December quarter is the product of some unique variables, such as the Olympics and the introduction of the GST.

The Prime Miniature would do well to remember how last weeks petrol price paranoia has threatened the dollar – and that the oil companies have already negated the price cuts.

If he capitulates to populism once again and blocks the Woodside takeover, heres betting it slides below US 50 cents.

That’ll be fun – and all his own fault.

Fings aint wot they used to be

While all this was going on, where was the lounge bar bore of the Gallery, Alan Ramsey?

There he was, off in a corner, whistling Fings Aint What They Used to Be as he tapped away with two fingers on his manual typewriter, pausing only at the end of every par to insert a new sheet of copy paper, working on yet another self-mythologising piece on the Gallery in days of yore.

Get over it, Ramsey. Get over it.


Editor’s Comment

Costello looked very flat on 7.30 Report last night and Howard’s attack on the Reserve Bank looked a little undignified.

Kerry O’Brien was right to point out that Costello was lifting growth forecasts just a few weeks ago and Labor was warning that the economy could overheat a few weeks back.

It’s all very well to say this is just the housing sector, but the fact of the matter is that Japan and the US have also gone into sudden decline such that we could very well have a technical recession with a second quarter of negative growth.

Howard and Costello need to quickly clarify the GST revenues so we all know where we stand on the budget going into this slowdown.

And how ironic that Telstra makes a record $2.6 billion for the half and now looks almost certain not to be fully privatised. Australia has accidentally benefitted by being slow down the privatisation path. It meant we got good prices for things like T2 and the Victorian electricity industry which has enabled public sector debt figures to hit record lows.

Those banks really are bastards

The last time Australia went into recession, ANZ and Westpac almost went broke and the collective value of our listed banks fell below $20 billion. Now they are worth about $140 billion and the trigger was the Howard Government’s final privatisation of the remaining 50.1 per cent of the Commonwealth Bank in June 1996.

The stock was flogged at about $10 a share and after this the banking cartel started closing branches and jacking up fees with gay abandon. As long as the government had control of the second biggest bank, this was never going to happen.

Your typical big bank CEO is now about $20 million in front on his shares and there is no better example than ComBank CEO David Murray who this month exercised 500,000 options at about $15.50 a share and then sold them for about $31.50 to crystallise an $8 million profit.

Someone needs to clobber the banking cartel into shape. They mercilessly rip off customers with their 18 per cent credit card rates whilst offering a paultry three per cent on term deposits.

Keating would never have allowed them to get away with their customer gouging so maybe this will be another reason to vote for Kim Beazley.

The property crash associated with the last recession was what flattened ANZ and Westpac. This time they have better risk-management practices in place. Try being a small business like Crikey getting an overdraft or a loan out of a bank. They’ll happily gouge a risk-free four per cent off you to process credit card transactions but don’t expect them to take any risks and actually lend you some money.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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