The Christmas/New Year holiday break did nothing to improve confidence levels among Australian consumers and some leading employers.

In fact, Australian consumer confidence fell this month after a three month rise off the back of 3% of rate cuts from the Reserve Bank and falling petrol prices.

After rising for a third month in December, the $10.4 billion stimulus package from the Rudd Government was supposed to have helped offset the pessimism among consumers.

But David Jones, the upmarket retailer revealed bigger than forecast fall in sales, and the country’s biggest cheap discounter has gone bust.

So no bounce from the boost, as the latest Westpac-Melbourne Institute index of consumer made clear this morning with sentiment down 2.2% to 89.9% in a survey of 1200 people between January 12 and January 18. The index has been under the 100 point level since February 2008, indicating that pessimism still dominates.  

Some analysts had wondered if the index would firm in the absence of any significant bad news over the break and the stimulus package, but Westpac economist Matthew Hassan said in a statement accompanying the survey report that consumers had entered 2009 with “great trepidation.”

Not helping are mroe signs of more stress among global banks, especially in the US and Europe — sharemarkets are weak and the 20% rally over the break has all but gone. Our market fell more than 3% on Tuesday and was down almost 2% just before noon.

Not helping the market was the flow of bad news on jobs from retailing and resource companies. That will add to the pessimistic outlook among consumers and also pressure the Reserve Bank to cut rates by more than half a per cent early next month.

BHP Billiton said this morning that it is suspending operations at its Ravensthorpe nickel mine in Western Australia. With cuts at a processing facility in Queensland near Townsville, and at another WA nickel mine, job losses will total some 2100, with more to come as the future of the Queensland plant is now being reviewed. BHP also revealed cuts of 1100 jobs in its Queensland coking coal business, and 2500 jobs overseas in the US and Chile. A further 200 jobs will go in South Australia at Olympic Dam, bringing the total number of local sackings to around 3500.

David Jones is sacking 150 workers, Harvey Norman is closing four stores — with more than 40 jobs going from just one in Sydney’s southwest — and two ultra cheap retailing chains run by Australian Discount Retail (ADR) have gone bust.

It’s now clear that the retail slump that is working its way through the US , UK and Europe, culling thousands of jobs and stores as it goes, has well and truly arrived in Australia.

David Jones revealed plans this morning to cut 150 jobs from head office as cut its sales forecast for the second quarter of the current year to a fall of 9.5%, from November’s estimate of a drop of 7.5%.

Second half like-for-like sales are expected to drop 10%, instead of 7.5% and the retailer said it still expects cut its earnings forecast to between zero increase and a 5% rise instead of the earlier estimate of 5%-10%. The new lowered earnings forecast is for the next 18 months, which includes 2010 when sales are expected to be flat at best.

“Given the trading environment, a one-off organisational realignment will be undertaken in January 2009. This will result in a reduction of 150 Head Office & Administrative Support positions. However, despite 2 consecutive quarters of negative sales, the Company has been a net creator of jobs in the first half. This one-off realignment will not involve any customer service jobs,” David Jones said in its statement to the stock exchange.

Harvey Norman revealed yesterday it was closing a Domayne furniture store at Campbelltown in the southwestern suburbs: an underperforming area with high unemployment. Up to 40 jobs could go when the store shuts in March if the employees can’t be relocated. Four other Harvey Norman group stores remain on the endangered list nationally.

BHP’s move to suspend operations at Ravensthorpe was well-telegraphed to the market this week before this morning’s announcement. The company will write down the value of the mine and the Yabulu plant by a total of $US1.6 billion over the 2009 financial year. That’s about equal to the huge cost overruns which hit the plant when it was being built.

More than 2700 full time staff and hundreds more part timers could lose their jobs in the wake of the collapse of ADR with debts to banks of nearly $100 million. With trade creditors, the group owes well over $210 million.

Some 2700 full time staff are employed across 374 stores in the main chains, Go-Lo, Crazy Clark’s and Sam’s Warehouse.

The associated ADR-owned Chickenfeed discount chain, which runs 28 stores in Tasmania, had not been placed in receivership or administration and would continue to trade normally, according to the receivers.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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