Late yesterday and today:
Prominent retail executive Mark McInnes launched a blistering attack on the federal Labor government’s economic management and said it had overseen the loss of some 80,000 jobs in discretionary retail and cuts to thousands of employees’ hours.
Mr McInnes, the chief executive of Solomon Lew’s The Just Group and a former head of David Jones, said the government had engaged in “wilful neglect” of an industry that was the bedrock of the economy.
Failed retailers include Borders, Fletcher Jones, Bettina Liano, Ojay, Angus & Robertson, Darrell Lea, Mothercare and Lisa Ho, he said.
“Why have so many Australians lost their jobs? Why are so many retail businesses collapsing? And why is nothing being done?” he asked an Australia-Israel Chamber of Commerce event in Melbourne.
…He said the Labor government had taken retail for granted and pinned all hopes on a mining boom.
“Given the perfect political storm the government now confronts, a change in the economic cycle and a looming election, it seems to now acknowledge what workers, consumers and businesses have known for some time – that the rest of our economy has, long ago, screeched to a halt.
“Make no mistake, our country is confronting an economic crisis and if an $18 billion dollar deficit doesn’t convince you, then the ABS reporting 13.1 per cent of extended labour force underutilisation should. Unemployment is now its highest since the GFC.
“In a large part the crisis stems from the wilful neglect by government of the non-mining sectors of the economy coupled with expenditure commitments apparently driven by political tactics rather than responsible public policy,” he said.
Does McInnes really want to see greater government austerity for his shareholders? He is at least right about one thing. Government (including the RBA) has allowed retail to burn, and it did do it to “free up” resources for the mining boom, quite sensibly. Mining is a productive industry (extractive, sure, but heavily export oriented) in the new normal where investment in an economy’s productive capacity is the only way to grow.
On the other hand, retail is a consumption industry and is already grossly over-supplied after twenty years of the exhausted debt-driven growth model.
And that’s the thing. McInnes can complain all he likes to the nanny-state but he’d be confronting a much worse environment if not for the mining boom. Retail would have been a smoking crater had the post-GFC world not been fended off by the export investment surge related to mining. And to be honest, had it been up to me, I would have protected tradables much more and foisted more of the burden onto retail.
As I explained yesterday, the real structural adjustment we face is still widely unrecognised. It’s not just mining and the terms of trade that are now falling. We can’t grow via credit expansion and consumption like we used to either. We have to earn increases in our standard of living via productivity and improvements in the balance of payments. Retail can make its contribution by becoming more efficient but it will remain in the gun. As the dollar falls, retail margins are going to get further squashed as tradable prices rebound. Even so, it’s pain will be more productive sectors gain as growth in labour and other input costs is held down.
The great retail conflagration is a cleansing fire. Let it burn.
