Australia’s consumer recession deepens

This week’s economic data has provided more bonafide proof that the Australian consumer is in recession.

Earlier this week, the ABS revealed that retail sales volumes declined for the first time since the early-1990s recession, falling by 0.2% over the year:

Yesterday, the Federal Chamber of Automotive Industries (FCAI) released its new car sales figures for October, which declined by 9.1% in the year to October 2019:

It was the 19th consecutive month of declining new car sales, with rolling annual sales down 10.5% since peaking in March 2018.

FCAI blames “over-regulation of the financial sector” for the slump in new car sales:

“While the drought and other domestic conditions are impacting the market, our key concern is the effect over-regulation of the financial sector is having on new vehicle sales. The FCAI and our members have been concerned about the risk averse approach to lending in Australia for some time and see improved access to finance as a key to driving economic growth in 2020” Mr Weber said.

Household consumption growth is also way below historical averages and falling:

The underlying cause is not “over-regulation”, but the fact that real household disposable income is lower today than seven years ago:

Clearly, the Australian consumer is in recession, caught between no wage growth, underemployment, and record debt.

Unconventional Economist

Leith van Onselen is Chief Economist at the MB Fund and MB Super. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.

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Comments

  1. ContrarianMEMBER

    Will it start filtering through to retail employment especially going into the holiday season?
    The graph for real consumption looks very unhealthy and especially so if corrected for population growth.

        • You don’t need Xmas sales to tell you how sick the economy is. The economy is sick. It’s obvious.

          What part of the economy is going well, other than exports and government spending?

          Answer: nothing. Wages stagnant. Unemployment in an uptrend. Retail getting smashed. Construction in a death spiral. Banks cutting dividends. Housing transactions at multi year lows. Housing itself is rising purely on a regulatory put: it’s being kept alive on nothing except government intervention (forced easing, new grants, IR cuts) and the expectation of more.

          The reality is it is mighty sick already. Not even a good Xmas will turn that around. A bad Xmas will finish off the old nag for keeps.

          • Maybe, but I’ve heard it all before. Don’t bet against the miracle economy pulling through 😉

          • The so-called “miracle” has actually consisted of us continually running down our safety buffers, eating away our savings, hollowing out our economy and adding to our debt each time.

            It’s not eternal. And we are getting weaker the longer it runs, not stronger.

            Next?

          • interested partyMEMBER

            Sick, or normalising?
            Have we all just lived through a credit driven aberaton era and now consider that to be the new normal?

          • Perceptive and accurate assessment A2.
            In addition ( beyond the deteriorating ‘numbers’ that are examined here daily) there is the growing sense by most now that ‘something’ has changed irrevocably and that intuition creates a lot of angst. Also, decades of pretty good economic data that nicely touched most, created a cavalier attitude that it must continue without end.

            Now, the folks are feeling the general decline and it’s a shock to their belief system that was not expected. Simultaneously, in the look-around for the reasons and the natural desire to apportion the blame, is the recognition that the crushing immigration levels really have modified the country. It’s now dawning that unlike a temporary downturn in economic activity that can and usually does recover after a period, the changes being wrought from the wild importation of people and the negative attributes that it brings will be a ‘permanent’ issue; the unseen, un-measurable aspects of ‘an economy’ that is regularly ignored when just the numbers are examined.

          • Previously we had Iron ore price rise from $20 / ton on pathetic volumes to $100 / ton on ten times the volume for almost 20 years.

            Then we had $1 Trillion direct foreign investment for 4 years building out our mining infrastructure.

            Then we had $2 Trillion in off shore lending to fund speculative investment in apartments.

            Those are the drivers of the last 30 years of our economy.

            All of them are now finished. Unless Saudi Arabia suddenly runs out of sand and spends their entire fortune buying ours we have nothing left.

            Thats where we are at – and all we have to show for it is the destruction of our academia, science, manufacturing, secondary / tertiary industries and more debt than any other country on earth.

            So no – just absolutely NO.

          • @Genghis – As I like to say we used the money from the mining boom as collateral for even more debt vs actually saving it for a rainy day. Australia has a really bad way of managing prosperity and or lucky/windfall gains.

        • Rising house prices masked those stresses, if in real trouble they could sell up and clear their debts. Not so now and many are beginning to notice their NEW predicament.

    • That point about population growth is interesting. I think the recent crop of vibrants – coming from 4th tier rural India, and Nepal as they do and having large debts to fraudulent offshore migration agents, not to mention getting totally ripped off wages wise – are not well placed to boost Australia’s retail figures. Other than to clog up our roads, footpaths, schools, hospitals and trains and litter our footpaths with untaxed illegal cigarette butts, I am not really clear about their reason to be here.

      • I think the Scummo & Josh Show share your disappointment. Can we exchange these ones for better ones? At least, those with deeper pockets and penchant to spend.

        • Nah
          You mean the Chinese and they’re about to inherit Aus & thus the economic problem. Mind you, they do have the solution – why pay workers at all? A good solid labour camp solution will allow Aus to become one of the world’s leading exporters…

  2. Hill Billy 55MEMBER

    Why would we worry about piling up more, sorry, MOAR debt when the Westpac financials are already showing an increase in bad debts? What could possibly go wrong? Lend you good things – go harder!

    • Jumping jack flash

      If you don’t have 5 mortgages with 4 different banks, you’re simply not trying hard enough!

      If you’re not working 3 different jobs a day in the gig economy to pay for it all, you’re a traitor to the cause.

      Do it for your country!
      Where have all the patriots gone?

      • We’re importing them at a furious pace – they just don’t get our ‘values’ yet. On the visa application we really need to ask outright how the applicant feels about ‘sausage in bread’ and taking on insane amounts of debt.

        That way we can ensure we get the ‘right’ kind of migrant.

        • Jumping jack flash

          Unfortunately in almost all cases the immigrants are simply not paid enough to take on the necessary amounts of debt to make a difference in our wonderful economy.

          Even when working 6 different jobs a week delivering food and driving people around.

          Fear not! The government is glaring sternly at the unscrupulous business owners who dare to try to gain a competitive advantage in this zero-sum economy by taking advantage of people willing to work for tiny amounts of money. How dare they? Bad! Bad, bad bad bad! Shame on them.

          So once all that abundant wage capacity that hasn’t been tied up with debt already, that’s all laying around everywhere (seriously I can’t get out the door without tripping over some!) is paid to all the foreigners so we all can earn a fair wage and still all have jobs and be able to afford food and energy in this amazing, magic-pudding economy, these guys will all be able to take debt on in the billions too, and the economy will be saved!

          • What a mess. Businesses cannot turn a profit without ripping off their workers. The workers can’t afford to spend because they don’t have any disposable income. Middle income Aussies can’t spend because they’re drowning in debt already. So, what’s wedging both businesses and individuals right now? Rents and mortgages.

            Commercial real estate is way too expensive for so many businesses to afford (and survive) but landlords are standing firm (for now). Residentials rents, which are a reflection of property prices are also too high, especially for the lower income earners. Wages meanwhile, are going nowhere so something has to give: rents need to decline or wages need to rise. If neither of those happens a recession is a dead cert.

            I am looking forward to seeing rivers of blood in the commercial real estate sector — those guys have been raping and pillaging for too long. Lowy was right to sell up and get out when he did. He gets it. Cunning as a rattle-snake.

          • Jumping jack flash

            “Businesses cannot turn a profit without ripping off their workers. The workers can’t afford to spend because they don’t have any disposable income. Middle income Aussies can’t spend because they’re drowning in debt already.”

            Its a bit of a dangerous position because this reeks of how things were before the great depression. Workers couldn’t afford to buy the things they produced. The whole place went backwards and then businesses started shedding staff, and it all turned into a massive mess.

            I guess our glorious leaders assumed that because we don’t produce anything now we couldn’t find ourselves back in that position. But the problem is that now in our case we produce debt and that must be considered in the same way. If our downtrodden can’t afford the debt, then we are essentially moving backwards and depression is almost a certainty. Debt is even more dangerous because it requires interest to be paid on top of it.

            Making debt cheaper wasn’t the answer. Its a tricky nut to crack, and I don’t believe anyone has any ideas what to do.

            There certainly is a solution though. But it will require our leaders to actually take on some responsibility, to obtain a clue about what they’re supposedly put in charge of, and in many cases, grow a brain.

            Too much to ask for at this point in the cycle I think.

  3. Jumping jack flash

    “Clearly, the Australian consumer is in recession, caught between no wage growth, underemployment, and record debt.”

    More debt is obviously required, then.
    Lower the cash rate, that’ll surely help getting more debt to the people. More people are required too, they will be able to take on extra debt.

    In any case, all this breathless reporting is completely moot. Those last couple of cash rate cuts have only just been made. House prices are already exploding as a result, and then the wealth effect and trickle down will do the rest. Wages will leap. Fulltime positions will be so plentiful they will need to import even more people to fill them all, paying them fairly, of course.

    We’ve got nothing to worry about. Everything is under tight control of our glorious leaders of the economy.
    They’re clutching their copy of the “How to create a booming economy with debt and nothing else” playbook tightly, reading it feverishly, calculating the next step carefully. There will be no unilateral knee-jerk reactions here. No sir.

  4. Earlier this week, the ABS revealed that retail sales volumes declined

    So even with immigrants being pumped into the system at full blast every day, sales volumes have not just slowed, but declined. This bodes well for the future.

    House prices to skyrocket of course.

    • This

      Our migrants – in aggregate – are leaners, not lifters. Which is a disaster, long-term. We’re going to turn into a nation of dead-beats. The welfare system will simply collapse under the weight.

      • Unless we copy Dubai and deport the foreingers when they turn 60.

        Scummo may have smartened up and realised that “skilled” men will keep coming to Australia even if they are never given an Aussie passport.

    • Jumping jack flash

      This for sure!

      Since debt is now required because incomes and savings alone are simply not enough anymore, you’d think the banks would make it even easier to obtain.
      Seriously, how many more cash rate cuts will it take!? The RBA is bending over backwards here.

      Debt is now an essential resource. If you haven’t taken on a stupidly huge pile of debt and swapped it all immediately for a house, then you’re a financial and social failure.

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