Australian consumers have power in their pockets - and they're holding onto it.
ANZ and NAB are predicting the Australian economy will shrink this quarter, after the Morrison government warned of the same earlier this week. Bushfires and coronavirus are largely to blame, they say.
Reserve Bank of Australia governor Philip Lowe doesn't agree, saying things will need to get a lot worse on those fronts in order for that to happen.
The good Doctor gave his first official speech for the year yesterday at the National Press Club in Sydney. Lots of hay has been made from that address; if you want a faithful lowdown though, this transcript from the subsequent Q&A is action-packed.
Key points made include the expectation that employment will continue to improve, that interest rates won't go lower without sizeable increases in the unemployment rate, and that in general, things are looking up.
The big man also said that our record-low interest rates are due to Australians keeping their purse strings closed - thank you, low wage growth and uncertain employment conditions - and that the RBA is limited in what it can achieve without assistance from other quarters. Translation: the federal government.
Dr Lowe briefed cabinet earlier this week to tell them so to their face, although many members were left a bit miffed due to the lack of detail on what the Morrison government should be physically doing to stimulate consumer and business spending. That's something we'd all love to see, I'm sure.
Let's talk about cars.
...certainly none more than the new car sales sector. January saw a whopping 12.5 per cent drop in new car sales, following on from a horror couple of years of month-on-month declines. Even Australia's best selling car, the Toyota Hi-Lux, saw a 25 per cent drop in sales based on January 2019 - which suggests we're talking about issues with both consumer and business confidence.
Australian sales of electric vehicles, on the other hand, tripled in the past year. It's coming off a low base, of course - 6718 sold in 2019 compared to the previous year's 2216. For contrast, nearly 3000 Hi-Luxes were sold in January 2020 alone...
The big winners this week though when it comes to cars, are not the owners of a latest model - but anyone who has kept a 70s-era Datsun 240Z (pictured) lying around the garage. Once as common as muck, this admittedly pristine example just sold in the US for close to half a million Aussie dollars.
More blood in the water for retailers
High street fashion retailer, Colette has joined the growing list of national retail chains that have gone to the wall this summer, entering voluntary administration after running out of cash. Annual sales of $140 million across an Australian and New Zealand store network of 140 weren't robust enough to keep it solvent.
There's noise of more to come, including signals during result reporting season that conditions aren't getting better. The latest is today's report from furniture retailer, Nick Scali that holdups in its Chinese supply chain courtesy of coronavirus will impact next-half results.
One of the white nights for retailers over the past 12 months, the buy now, pay later providers such as Afterpay, Flexi Group and Zip Pay, may also soon take a hit. The RBA is worried merchants are passing service surcharges on to customers, and is working to regulate the practice. The central bank is taking the same line on banks charging merchants more for access to tap and go; it's pushing for banks to run the system across the cheaper EFTPOS network.
Gate-crashing the property party
In a renewed property boom where it's quickly becoming impossible once again to buy a capital city home in this country without being seriously minted, Dr Lowe has said the RBA is reluctant to continue to lower rates and fuel inequality in the housing sector.
Leg-ups for everyone else, like the Morrison government's first time buyer program, are going gangbusters. That program has been open for a month and already, 62 per cent of the allocated 10,000 places have been filled.
That ol' chestnut complaint that there's nothing out there to buy has been reinforced by Digital Finance Analytics this week, and contradicted by SQM Research figures showing property listings increased by 2.2 per cent in January nationwide and a cracking 5.1 per cent in Sydney alone.
Plenty of those listings can be found in Sydney Olympic Park, actually. This time last year, I sat across from a nearby developer as they opined that Opal Tower's structural issues, which came to light Christmas Eve 2018, wouldn't impact local property sales. That has turned out to be a spectacular miscalculation.
So where are they buying? Australia's favourite demographer, Bernard Salt has the answer: here's a list of Australia's 20 fastest-growing regions.