Consumer Confidence

[Steve Fitz]

I heard a really interesting podcast at the end of April on Qantas where an economist was discussing the trends in our markets globally and towards the end of the interview he revealed some really interesting facts.

(These might not be 100% accurate as they're from memory but they'll be close enough).

1. Typically Australians spend 8% more than they earn each year, and have done for the better part of the last 40 years.
2. Currently Australians are saving 11% of what they earn, paying down debt or saving.

Reason - a huge lack of confidence in our economy - people didn't like the GFC and felt exposed and have now drastically reduced spending and are reducing debt in a greater way than they have ever before.

One point made was that there is currently 8 billion available for Australians to invest. The interviewee's prediction was that it would be spent on Shares primarily, with only a small portion heading into property when confidence returns.

My two questions to you all are;
1. What triggers do we need to see or look out for as signs confidence might be returning.
2. Do you think those triggers will rebound the state of property, or will property be depressed for longer as investors look to invest in Shares.

 

[Aaron Sice]

This is something I was only talking with one my developers this morning!

The key to housing growth in this state is wage growth. I think we're near the bottom but there'll be some flat markets for a while to come while this excess supply of stock is chewed through.

And then there's the sentiment. It's not so much negative as jaded. Which means it could take more than just a few headlines about rising property prices to get the general populace wanting to invest.

And then the banks still have to come to the party. They're off enjoying their higher margins and higher deposits because it mitigates their risk and increases what they can lend out, so I don't think serviceability calcs will change soon, if ever.

Therefore, the only key to housing growth is wage growth.

 

[Steve Fitz]

That's interesting regarding your thoughts on wages as right now I would think most businesses have an excuse 'not' to lift wages due to depressed activity.

I would have been more inclined to think larger actions by government such as lowering of taxes, stimulation of economy (perhaps boosted FHOG) or lower interest rates from the RBA would be triggers.

The flow on effect from any of the above could be greater employment levels which may also lead to increased salaries.

Interesting that BHP have recently called on government for further skilled migration which might again push up salaries of 'skilled' workers in other sectors that over recent years have been poached into the mining sector.

 

[Steve Fitz]

As a side note; 70% increase in fruit and vege prices isn't helping and neither is this bloody carbon tax talk that is leaving all Australians wondering how much more our cost of living is going to rise.

 

[Ausprop]

That's interesting regarding your thoughts on wages as right now I would think most businesses have an excuse 'not' to lift wages due to depressed activity.

what depressed activitiy are you referring to? presumbaly retail? destruction of some of our consumerism in favour of production is probably a good thing anyway. In other industries it is hard to maintain staffing levels because the bigger resource and associated companies just offer bigger and bigger carrots

 

[Ausprop]

and neither is this bloody carbon tax talk that is leaving all Australians wondering how much more our cost of living is going to rise.

true. can't these clowns wait until the good times are well and truly rolling before carrying on about this? it's only 12-18 months away according to their projections

 

[Ocean Architect]

I think that along with what was mentioned by the posters above (which I very much agree with) it is also important to consider that many people have already bought an excess of consumer goods and really don't want/need any more, which will dampen consumer spending for a while and present as a false negative indicator of "low confidence" when in fact, it is an indicator of people being saturated with goods.

I don't know if it's just me/the people I associate with, but it seems like everybody's house is overflowing with plasma screens, clothes, computers, toys etc, and even my hardcore spending family members have pretty much everything they want (often more than one of each) and have really slowed their spending down.

 

[silverx]

I think that along with what was mentioned by the posters above (which I very much agree with) it is also important to consider that many people have already bought an excess of consumer goods and really don't want/need any more, which will dampen consumer spending for a while and present as a false negative indicator of "low confidence" when in fact, it is an indicator of people being saturated with goods.

I don't know if it's just me/the people I associate with, but it seems like everybody's house is overflowing with plasma screens, clothes, computers, toys etc, and even my hardcore spending family members have pretty much everything they want (often more than one of each) and have really slowed their spending down.

but we need that new ipad2, apple tv, white iphone 4 and macbook !

 

[Ocean Architect]

but we need that new ipad2, apple tv, white iphone 4 and macbook !

You're right, I should slap myself for underestimating human avarice and stupidity.

You must admit that it is ridiculous though - people are installing 42 inch LCD screens in their kids rooms. I'm still feeling guilty about my iphone after finding out that it was produced by Chinese workers working 12 hour shifts in buildings with suicide nets installed so they can't jump off the factory roof

 

[Steve Fitz]

what depressed activitiy are you referring to?

I was speaking across the board really. Other than mining most other industries are still feeling the pinch as far as I know.

While your business might be losing staff to mining, are you just replacing them or is your business growing?

 

[Aaron Sice]

That's interesting regarding your thoughts on wages as right now I would think most businesses have an excuse 'not' to lift wages due to depressed activity.

kinda my point. Until the 2.4mil workers required start filtering through from the training facilities in India and Indonesia then we won't see any change in wages until productivity is lifted.

Which won't happen because the unions have a stranglehold on labour and Labour.

Catch 22. until something gives, there'll be stagflation. But I put more trust in the efficiency of the private sector to get around the unions than in Labour to mandate in time to strangle 457s, therefore I see wage growth on the horizon when businesses do anything to break free of the labour supply handcuffs.