WHILE AUSTRALIAN CONSUMERS HAVE THE MEANS AND THE WILL TO START SPENDING AGAIN, THEY CAN’T SEEM TO SHAKE A SENSE OF GLOOM. BUT THE FEDERAL ELECTION MIGHT DO THE TRICK.
I HAVE A SIMPLE, YET POWERFUL PROPOSITION: The coming federal election will trigger a shift from the austerity that has dominated consumer behaviour since the global financial crisis. What lies beyond, at some point, is a new era of rising consumer confidence and retail spending.
In the years since the GFC began in 2008, Australian consumers have paid back debt and increased household savings. The national unemployment rate remains below 6 per cent, whereas at the peak of the 1991 recession the rate exceeded 10 per cent in most states. Interest rates remain at historically low levels and the Australian dollar has hovered around parity with the US dollar for close to five years.
While a high dollar has a negative impact on Australia’s ability to sell agricultural and manufactured products, as well as tourism and education services overseas, it is nevertheless viewed positively by many consumers. We like knowing “our” currency is roughly the equal of the American dollar.
Yet despite what might be regarded as a series of good-news indicators, the mind and mood of the Australian consumer has remained fairly dour.
It is almost the fifth anniversary of the collapse of Lehman Bros. The worst of the Great Depression was over within four years andWorldWar II was done in six. Five years for a not-quite recession is sentence enough. It’s time to move on, to begin the cycle that builds confidence and leads to the next boom.
The interval between the peak of one boom (say, in the late 1980s) and the peak of the next boom (in the mid-2000s) was about 15 years. If that were repeated precisely, the next peak-spending era would be around 2022.
But this is not my point. From a business perspective, it’s not the peak-to-peak timing that is important. It’s more important to figure out how long we have to wait for the beginning of the upturn. Chief executives and boards want to invest in a rising market, as opposed to a falling or stagnant one. So if the next peak in spending is around 2022 (based on peak-to-peak interval theory), when will the upturn begin?
After the recession of 1991 the mind and mood of the Australian population was mightily subdued for some years. Sydney seemed to pull out of the doldrums first, in 1994. The catalyst, I think, was being awarded the 2000 Olympic Games in October 1993. Suddenly large-scale, government-funded urban infrastructure projects were under way. Within two years, Melbourne was starting to kick in, with projects such as CityLink, Crown Casino and what is now known as Etihad Stadium.
By 1996, there was movement in both cities and that then spread to other parts of the nation. The interval from the worst of the recession (1991) to the beginning of a confident recovery (say 1996) was five years. The GFC did not have the same deleterious impact on the economy as the 1991 recession. The underlying economic indicators today are positive.
Population growth has continued at