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Why are Aussie retailers missing out on the global boom?

Crikey logo Crikey 12/07/2018 Alan Austin
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Australia’s shop keepers are about to record one of their worst years ever. That’s the dismal message from the Australian Bureau of Statistics in this month’s report on retail trade.

To a significant extent, however, the retailers have themselves to blame.

What the data shows

Total retail turnover was $26.7 billion for the month of May. That’s an increase of just $648 million — or 2.49% — over May last year. With population having increased 1.59% over that period and inflation at 1.9%, sales volumes are clearly in trouble.

Monthly numbers bounce around, of course, but we now have figures for the first 11 months of the financial year 2017-18. Total turnover for that period was $289 billion, an increase of just 2.52% over the equivalent period in 2016-17. Even if June turns out to have been an exceptional month of bumper winter sales, the increase in retail turnover for the full financial year will not exceed 2.7%.

That is the lowest increase since records of retail turnover began in 1982. In fact, only once before has the percentage increase over a financial year been below 3%. Unsurprisingly, this was in 2011 when the world was in the worst economic crisis in eighty years.

This year-on-year outcome might not be so bad if performance last year had been strong. It wasn’t. The increase in 2016-17 was only 3.11% above 2015-16. The medium term average annual increase — for the 20 financial years prior to this one — was 5.03%.

Department stores in the dumps

Of the five retail sectors the ABS tracks, the worst hit has been department stores, with a rise so far this financial year of just 0.07% over the same period last year. That is a disastrous real decline.

Not surprisingly Myer Holdings shares have halved in value over the last 12 months and other retailers are also losing value.

Also faring poorly are the household goods sector and the clothing and footwear sector, up only 1.86% and 1.85% respectively. Sectors performing a bit better are food up 3.09% and restaurants and takeaway services up 2.89%. People still have to eat.

The rest of the world

It is quite extraordinary that retailers in Australia are faring so badly while the whole world is in a robust upswing in trade, corporate profits, executive salaries and jobs.

Of the 34 developed countries in the OECD whose retail trade history is recorded, only two have copped a serious decline in retail trade over the last four years — Australia and Ireland. Of these, Australia’s collapse has been worse.

This strongly suggests that the causes are local, and not attributable to global influences such the rise of online sales.

How has this come about?

In fact, this is precisely what has been predicted by critics of the Coalition’s policies which shift wealth and income from low and middle income earners to the large corporations and high-income individuals.

As Crikey has regularly reported, wages have been depressed over the last four years, the tax burden has shifted from corporations and high-income professionals to wage and salary earners, and underemployment remains entrenched.

When household incomes decline, retailers suffer. People simply do not have money to spend. This then flows through to wholesale, transport, primary production, manufacturing and imports. These are all key areas for jobs and growth — which everyone agrees are the priorities — but which in Australia are now seriously lagging behind the rest of the world.

Role of the retail lobby

Bizarrely, the Australian Retailers Association routinely opposes even the minimal cost-of-living increases in wages, has actually backed the government’s moves to cut penalty rates for employees and openly barracks for the Coalition’s economic policies that have caused the economic decline over the last four years.

No wonder their customers cannot afford to shop as they used to.

The post Why are Aussie retailers missing out on the global boom? appeared first on Crikey.

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