Solomon Lew wrongly blames Labor for retail woes

Retail mogul, Solomon Lew, has today launched an extraordinary diatribe against the former Labor Government, which he claims inflicted untold damage on the Australian retail sector. From Business Day:

‘‘I think the legacy of the former government in its inept handling of the mining boom at the expense of the non-resource sectors continue to impact on retail given the employment numbers last week, the continued strength of the Australian dollar and the fragility of consumer confidence,’’ Mr Lew said…

‘If you ask me I’d say to you the former government’s complete disregard for the non-resource sector of the economy while it sort of bummed its way through the mining boom is a major contributor to the poor health state of the retail sector.

‘‘Even good retailers found it very very hard, and it almost feels that what the new government needs to concentrate on is [being] medical people, apply what you would call CPR.

‘‘C stands for confidence, P for productivity and R stands being responsible’’…

‘‘80,000 Australians have lost their job in the last five years as a direct result of poor government policy and as [Solly Lew] said [its] not investing in the retail sector whilst taking for granted the mining sector,’’ Mr McInnes said.

This is hilarious from Lew. Has he forgotten that it was Labor that provided the much derided and “irresponsible” stimulus payments to families in the wake of the GFC, much of which flowed directly into the retail sector? And has he forgotten that Australia was one of only a few developed economies to escape the GFC without experiencing a technical recession? Or that Labor ran a high immigration program, which provided the retail sector with more consumers to sell goods to? Or that Labor attempted to rebalance the economy away from mining via the original Resources Super Profits Tax, only to be crushed by the Coalition Opposition and intense lobbying from the mining sector and media?

Sure. The previous Labor Government was by no means perfect. However, what Lew fails to comprehend is that the high growth in retail sales in the lead-up to the GFC were unsustainable, driven primarily by the 20-year credit boom and the huge expansion in household debt. Even after Labor’s so-called incompetence, retail sales have still managed to grow at a faster rate than household disposable incomes since 2000 (see next chart).

With the credit boom seemingly over, and the once-in-a-century mining boom unwinding, Lew better get used to a low growth future for retail. The election of the Coalition Government does not change these structural headwinds.

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