Jan 10, 2014

Retailers, enjoy the boom while it lasts — the crash is coming

The recent surge in retail sales makes the outlook brighter for employment, but don’t be surprised if it's just a temporary spike. Spending growth could slow as households become more cautious.

Callam Pickering — Former RBA economist and <a href=Business Spectator economics editor" class="author__portrait">

Callam Pickering

Former RBA economist and Business Spectator economics editor


Retail spending continues to boom, but how long can it last? Not as long as the Reserve Bank of Australia needs it to unless the labour market picks up soon. Retail sales rose by 0.7% in October, beating market expectations significantly, to be 4.6% higher over the year. Growth continues to be driven by discretionary spending -- the most cyclical category of consumption -- indicating that consumers continued to be fairly buoyant heading into the Christmas shopping season.

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6 thoughts on “Retailers, enjoy the boom while it lasts — the crash is coming

  1. Jimmyhaz

    The government continuing to suck money out of the economy makes a crash inevitable, the only question is when.

  2. Suzanne Blake

    Sucking money out of waste to repay Labor debt, is unlikely to cause a crash.

  3. Jimmyhaz

    Believing that a sovereign economy has any requirement to pay off its ‘debt’ shows a fundamental misunderstanding of both how the Australian government issues ‘debt’ (I don’t like calling it debt, as that implies that paying it back is a necessity), and of how growth of fiat economies is sustained.

    Furthermore, even if it was a necessity for our government to pay of its debt (it isn’t), raising taxes in the short term is far less harmful to the economy than the current coalition method of slashing-and-burning everything that it considers to be waste. I’ve said it before and I will say it again, the governments continued rabid desire to slash public expenditure has far more to do with slashing welfare, than any idea of fiscal responsibility.

  4. Hamis Hill

    Sucking money out of the economy, (making it scarce) and raising interest rates, is likely to cause a crash.
    Suzanne clearly doesn’t understand conservatism.
    Its other name , care of the father of economics, is “Idle Rich”.
    They really like high interest rates.
    They really hate high wages.
    But we need high wages and low interest rates in order to sustain $1,75 Trillion of mortgage debt.
    Labor did a good job of counteracting the causes of the GFC.
    Conservative monomanaical greed, (as per Suzanne), is blind to the defects of austerity, in these circumstances.
    Job losses, mortgage defaults, and “The Inevitable Abbott Recession”.

  5. Jimmyhaz

    They aren’t blind to the effects of austerity, in fact, they are well aware of its causes. Spain and Greece, arguably the two hardest hit nations in the EU, have an enormous unemployment rate, a decreasing median wage and skyrocketing household debt levels (this is private debt being sourced to subsidise public debt, which is required of nations with a trade deficit to post a surplus). However, at the other end of the spectrum, the amount of millionaires has increased, as has the percentage of the nation’s assets owned by the top 10%.

    The people backing the LNP are all too aware of what a surplus means, their economic plan is all about giving themselves a greater share of the wealth.

  6. Hamis Hill

    Yes, Jimmyhaz, those who already have money can increase its purchasing power by selling The $Aus while it is still relatively high and then come back and buy up when the dollar falls,
    And if their is a complete “flight of capital”, (the analogy of a labour strike) then the economy will collapse altogether, there will be a recessionand the purchasing power of those other currencies will even more powerful with even better bargains.
    Now if only Abbott can organise a financial crisis only restricted to Australia, then all those properties being snapped up by foreign interests could be accrued en-mass and then sold to the millionaires from those countries, post-recession.
    Is that a Machiavellian enough scenario for you?
    The crash is coming but not everyone will lose.
    In fact, those selling out before the crash will profit more than those forced to sell after. That is when they can come back in, after forcing the crash, and buy three properties or more for the price of everyone they sold.
    It is going to be hilarious as Abbott singlehandedly pricks the $1.75 Trillion Howard mortgage “Wealth” bubble set up by the local banks, who are not too big to fail.
    Why do you think Hockey wants $500 Billion in “emergency ” cash?
    Because as the article says -the crash is coming, and maybe Joe will buy some defaulted mortgages at a bargain price.
    Isn’t that how a financial crisis works?

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