Some Australian families are struggling, but fewer than ever before.
By Alan Austin | 5 August 2024
Consumer spending data, analysed correctly, shows the economy is nowhere near as bad as news reports claim. Alan Austin reports.
DISTORTIONS, exaggerations and blatant falsehoods about Australia’s economy are accelerating as Anthony Albanese’s Labor Government ploughs into the last year of its first term. Will it get a second term? Not if the mendacious pro-Coalition mainstream news media gets its way.
Headlines in the Financial Review in the last week included:
‘Labor braces for higher inflation, interest rates’;
‘Worst day for ASX since SVB crisis as U.S. recession fears surge’;
‘Why recession panic is gripping the markets’; and
‘Albanese can’t afford distractions now’.
The Australian headed its horror stories thus:
‘Restaurants and retailers collapsing at record rate’;
‘Failure of public policy to blame for Rex’s demise’;
‘Weak economy takes its toll on Allegro’s TGE with $190m loss’; and
‘Mars fighting “unprecedented” cost pressures’.
Let’s celebrate low unemployment and rising real wages
Having turned the economy around after years of Coalition mismanagement, the Albanese Government is giving Australians reason to celebrate.
ABC News added to the negative narratives, as always:
‘Government's inflation policies hurting: Shadow Treasurer’;
‘Anthony Albanese's woes go much deeper than a reshuffle. Voter confidence has plummeted’;
‘For the first time in months, household spending has fallen’; and
‘Can Labor win a second term in this economy?’
In an unfortunate development last week, some of the alternative media also gave comfort to those seeking to blame Labor for an imaginary cost of living crisis. Their intentions were not malicious, however.
The Guardian ran an analysis last Thursday titled, ‘Australians are struggling to make ends meet. This is not an economy in need of more rate rises’.
Crikey ran a parallel piece, headed, ‘As consumers cut spending, governments keep pumping inflation’.
Both headlines unfairly implied the Government is failing, which is not the case. They made the same error in analysis, albeit unwittingly.
The Guardian claimed:
‘In the past year, the volume of retail trade (ie the amount of things we bought, rather than the amount we spent) fell 0.6%.’
Crikey made a similar assertion:
‘June’s retail sales data from the Australian Bureau of Statistics showed a headline rise of 0.5% month on month. But that disguised yet another fall in retail volumes for the June quarter, this time of 0.3%, continuing the trend of the past year and a half as consumers continue to shun anything but one-off specials or deeply discounted products.’
It is true that the volume of goods bought by customers has declined in six out of the last seven quarters. And yes, that looks bad when stated like that. But there is more to the story.
Retail sales are tricky to analyse because of an aberrant surge in volumes and values well above the trend line in the 2021 December quarter, due to COVID stimulus. That surge of 7.8%, highlighted in red on the mauve chart, below, is unprecedented since records were first kept in 1983.
(Data source: ABS)
Normally, the next quarter after an anomalous rise is a contraction of about the same amount. An earlier surge of 3.5% in June 2000, after that year’s recession, was immediately followed by a decline of -3.7% in September 2000.
But there was no correction after the extraordinary December 2021 surge. It rose 1.1% in March 2022 and another 0.8% in June. Quite remarkable!
Retail values and volumes were then at all-time highs relative to other measures, and almost certainly unsustainable at those levels — as has been proven.
But instead of a sudden drop, as usual, the decline has been gradual. So shallow, in fact, that sales to gross domestic product (GDP) in June were still at the all-time high.
So while it is true that volumes have slipped marginally in the last year, they are still at historic highs, as indicated by the green trend line on the chart above.
Looking in the right places
Clearly, we need to access several files to understand accurately what is happening and we must examine all relevant history.
When we measure total retail sales as a percentage of GDP, which indicates the retail sector’s relative success, we find the highest level in history is right now.
(Data source: ABS)
Spending on luxuries continues to surge
Last week’s retail sales figures continue to show fresh records for luxury items bought. As a percentage of all retail turnover, spending on takeaway food and dining out reached a new high of 15.1%. Cosmetics hit a fresh record 6.2%.
Hammering this home
This column has made these points before with earlier data — that while many Australians are struggling with cost of living pressures, the number in strife is lower now than ever before. Those not oppressed are wealthier than ever.
This is critical because the pattern is now entrenched in Australia of the pro-Coalition mainstream media condemning Labor for imagined failures and succeeding in getting citizens to vote them out. The incoming Coalition then proceeds to do exactly what Labor was wrongly accused of doing.
The malicious campaign by all the media in 2013 focused on “Gillard's debt disaster”, “debt spiralling out of control“, “budget in freefall” and a “debt time bomb”.
In fact, the gross debt added per year by the Rudd/Gillard Governments was just $36.9 billion, during the worst global recession since the 1930s.
The corrupt and incompetent Coalition then borrowed $57.7 billion per year through the recovery phase pre-COVID. Over its entire term, including the COVID recession, the Coalition added $71.1 billion per year to federal gross debt.
Since the Coalition was tossed out, Labor has borrowed just $10.9 billion per year.
Who manages the economy makes a big difference.
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