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Australian shoppers scared to spend despite boom

July 1, 2012

Retailers have been hurt by the strength of the Australian dollar, which is encouraging people to turn to the Internet for bargains.


By Madeleine Coorey

SYDNEY: Australian retailer Peter Birtles has a shopper he loves to see walk into his store — he calls him ‘Barry’ and he’s a mine worker who enjoys his high-performance car, fishing and going to the gym.

“We’ve got the products that he’s looking for. He’s got money to spend,” explained Birtles, who is chief executive of the Super Retail Group, which owns auto, outdoors, cycling and sporting stores.

But for most Australian retailers, shopper Barry doesn’t hit the checkouts often enough, with sales booming in select pockets of the country in the grip of a mining boom but floundering elsewhere.

“We’ve got businesses in mining communities and the rest of Australia,” Katie Page, chief executive of electrical and computer giant Harvey Norman, told AFP.

“If you look at our businesses in those mining communities, it’s going really strongly. I think that tells you everything.”

As Prime Minister Julia Gillard’s government often states, Australia’s economy is growing faster than most similar advanced economies thanks to strong demand for its mineral riches from neighbouring Asia.

Unemployment is at an enviable 5.1 percent, annual growth is at 4.3 percent and interest rates, while high by international standards, are back at levels not seen Down Under since the months after the global financial crisis.

It is a two-speed economy with mining doing well but areas like retail and manufacturing suffering.

The hard-hit shopping sector says the “bounce” has mostly bypassed retailers, with businesses forced to repeatedly cut into margins and discount stock to entice people to part with their money.

Global financial turmoil, coupled with political uncertainty in Australia, where the last election ended in a dead heat and Gillard leads a fragile coalition government, is feeding negativity and uncertainty, they say.

The introduction of a new carbon tax, due to come into effect Sunday, which critics have argued will see household utility bills soar, is only adding to the unease, they argue.

“The state of mind of a consumer at the moment is being driven by whatever they see on the news that night — Greece again,” Margy Osmond, head of the Australian National Retailers Association (ANRA), told AFP.

“It is being driven by what they perceive as political uncertainty here… new and higher utility bills, the prospect of new taxes like the carbon tax.

“All of these things combined create a level of uncertainty and an unwillingness to spend excessively or spend at the levels we’ve seen previously.”

Looking for bargains

Meanwhile, retailers have been hurt by the strength of the Australian dollar, which is encouraging people to turn to the Internet for bargains, in many cases bypassing Australian stores entirely.

Traditional retail sales totalled Aus$218 billion (US$219 billion) in the year ended March 2012 and clocked year-on-year growth of 4.1 percent, according to a National Australia Bank report.

But consumer sentiment is anaemic and is in stark contrast to the years of confidence before the global financial crisis when people were often spending more than they were earning.

“There’s a lack of confidence out there. Consumer sentiment, apart from 2008, is probably at its lowest level for 15 to 20 years,” Ian McLeod, managing director of supermarket giant Coles, told an ANRA lunch last week.

Harvey Norman’s Page, whose firm operates in eight countries, including hard-hit parts of Europe and the Asian economies of Malaysia and Singapore, said it boils down to a matter of trust — and Australian shoppers do not trust anyone, including the government, bankers, retailers and the media.

“What’s happening now has never happened before — this happens when there is particularly high employment, particularly high interest rates, the whole world has collapsed,” she said.

“But the whole world hasn’t collapsed for Australia.”



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