Remember when the government’s tax refunds were all that were needed to fix Australia’s economic malaise? How it was going to be 2008 all over again, as grateful taxpayers celebrated a Coalition election win by spending their refund cheques? As last week’s August retail sales figures show, that isn’t the case at all — not nationally, and particularly not in NSW.
In fact, consumers in Scott Morrison’s home state have been refusing to open their wallets for some time, particularly since the February-March period of this year. As Crikey has pointed out a couple of times this year, retail sales have been flat or declining in the premier state since August 2018 (when Morrison knifed Malcolm Turnbull), despite a brief pick-up in February and March. Last week’s figures showed NSW sales rising 0.3% in August in seasonally adjusted terms and flat in trend terms. Over the year to August they rose just 0.3% in NSW in trend terms compared to a 2.3% rise in sales nationally.
NSW consumers face the same challenges as Australians elsewhere: the consequences of the government’s wage stagnation policy, weak house prices and high debt. But something else is eating away at people in NSW and it’s not clear what. There was a state election in March, right before the May federal election. Double Coalition wins (both narrow) seem to have provided no bounce whatsoever, nor have successive interest rate cuts — even though they appear to have helped stabilise or boost house prices, at least at the top end of the market.
It’s the actual dollar amounts that reveal just how bad retailing in NSW has become. In August, retail sales in NSW totalled $8.748 billion seasonally adjusted — that was up just $31 million from July. NSW retail actually peaked at $8.749 billion in February and March this year — August’s sales are still $1.5 million under that.
This is on top of national retail weakness. Retail sales are the best indicator of consumer spending and confidence and they are going nowhere as consumers refuse to spend. Nationally, retail sales rose 0.4% (seasonally adjusted) in August after being flat in June and July. This was thanks to a 1.9% rise in sales of clothing and footwear and a modest rise in sales in the heavily depressed department store sector, where major chains David Jones, Myer, Kmart and Target are all struggling and experiencing falling sales. In trend terms, growth was just 0.1%. Separately, car sales nationally and across the states have also fallen for 18 months and are down 7.9% so far in 2019.
Barring some miracle turnaround in spending, the Reserve Bank’s estimate of a 0.6% boost to aggregate household incomes from the government’s tax refunds looks unlikely to go beyond household savings accounts or increased mortgage repayments as consumers hunker down.
That, in turn, is bad news for retail sector employment: in the three months to August, retail shed nearly 14,000 jobs. In the year to August, it added a net total of 10,000 jobs, but much of that was last summer. Retail, our second biggest employer, is shrinking as a proportion of the workforce, despite the government’s solitary stimulatory policy of any note being aimed directly at it.
Worse, that’s happening at the same time that our third largest employer, construction, is contracting. The Australian Industry Group’s (AIG) Performance of Construction Index out this morning showed that the sector is in sharp decline, continuing thirteen consecutive months of contraction. The sector has shed around 9000 jobs (seasonally adjusted) in net terms in the year to August and, according to the AIG, “construction employment continued to decline in September”.
Maybe Scott Morrison should spend less time playing statesman in foreign capitals and more time in his home town, trying to get his fellow Sydneysiders to open their wallets — or at least trying to find out why they seem to be particularly averse to spending ever since he became prime minister.