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The resource dependent Australian economy is in a holding pattern as the tension ahead of a critical federal election ramps up. All eyes are on the bell-weather retail industry and Aussie consumers, who, according to a leading economist, have "gone on strike" in 2013.
In a brutal assessment of Australia's ongoing attempt at a transitional shift from rocks to shops, Robert Gottliebsen, one of Australia's most respected economic analysts, said that Aussie shoppers are secreting away their dollars.
According to Gottliebsen, a drastic situation requires drastic action.
"Australian consumers have gone on strike. And it's a strike that will require dramatic management changes among retailers to break. In just one year the proportion of consumers who want to save in 2013 rather than spend has risen from 40 percent to 46 percent while those who are less inclined to buy new things have risen from 49 percent to 54 percent," Gottliebsen said.
The main problem seems to be Australia's full-fledged migration to international online retailers. According to an annual global survey of almost 30,000 consumers by the Boston Consulting Group ( BCG) released this week, Australians are the developed world's most fervent online shoppers at international retailers.
The migration coincides with a collapse on consumer confidence exacerbated by the death knell of so many iconic local brands.
Australia has witnessed a slew of major failed retailers, most of them household names, for a generation of consumers.
Russell Zimmerman, executive director of the Australian Retailers Association, said that urgent reform is needed to stifle the economic drain from retailers' pockets to the worldwide web.
"The sharp surge in online shopping uncovered a flaw in the system -- the threshold is nothing more than a loophole that went unnoticed before the online shopping boom. Now, it's just serving as an unfair tax when it comes to Australian retailers competing for customers and achieving growth by offering online sales to their customers," Zimmerman added.
The threat of online: At present, only 6 percent of the total 258 billion AU dollars industry is online, with 2 percent from overseas online retailers, but the momentum trumps the numbers. " The genie is out of the bottle," one observer said.
The shift towards online shopping comes at exactly the wrong moment, as the mining investment boom comes to an end and the patchwork Australian economy seeks to transform into a more balanced, consumer-oriented machine.
However, as the BCG survey revealed, more Australians are choosing to save rather than spend.
The survey, which included 2,500 Australian respondents, is another slap in the face for the domestic retail sector, which has continued to shrug off the lethargy of a subdued spending climate and feeble consumer sentiment.
BCG's Jane Danziger said many respondents are battening down the hatches in expectation of tougher times to come, citing the looming rise in cost of retirement and healthcare, while the lure of online shopping and lingering economic fears undermine any consumer confidence.
The results clearly show retailers would be foolish to pin their hopes for a spending recovery on an uptick in the Australian economy. Fears about the economy and job security are certainly factors, and these have noticeably increased the past year.
"Australian consumers are increasingly jaded with the very idea of buying new things. They are becoming quite critical of companies pushing sales in an increasingly difficult economic climate," Danziger added.
But the show isn't over yet and newly minted Treasurer Chris Bowen will take a shot of courage from the latest edition of the Australian Food & Grocery Council (AFGC) Retail Index which shows the recent trend for declining growth in retail sales continued through the June quarter but predicts the rate of year-on-year growth will increase by the September quarter.
Released Friday, the Index indicates an increase of 2.8 percent for the three months ended September 30 2013, up from 2.6 percent year-on-year growth in the three months ended June 30, which would be the third consistent quarterly decline in the rate of growth.
For the month of June, the Index indicates that the Australian Bureau of Statistics (ABS) will report year-on-year retail trade growth of 2.5 percent and turnover of 21.9 billion AU dollars. The Index forecasts August year-on-year growth will be 2.7 percent, with turnover increasing to 22 billion dollars.
Australian Food & Grocery Council (AFGC) Chief Executive Officer Gary Dawson said there could be a glimmer of hope for the sector after the election expected to be called by Prime Minister Kevin Rudd sometime next month.
"The retail environment remains challenging, reflecting subdued consumer confidence. Indications of growth improving later in the year once the federal election is out of the way are encouraging and would see improved consumer spending supporting retail sales growth," Dawson said.
(1 U.S. dollar equals 1.09 AU dollars)
