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MOSLER'S LAW: There is no financial crisis so deep that a sufficiently large tax cut or spending increase cannot deal with it.

Australia

Posted by WARREN MOSLER on December 20th, 2010

I don’t follow it at all closely but in general they have been following a policy of budget surpluses and relying on increasing levels of private sector debt to sustain aggregate demand.

That’s not sustainable, even for China’s coal mine, and especially with China showing signs of slowing down.

Retailers cry poor as sales drop sharply during Christmas period

By Nick Gardner and Brittany Stack

December 19 — MAJOR store bosses claim Australia is experiencing a retail recession, with the quietest and slowest Christmas shopping period in 20 years.

Rising utility bills, mortgage rates and rents have decimated families’ disposable incomes, forcing many retailers to start Boxing Day sales one month in advance in a bid to entice shoppers, reported The Daily Telegraph.

Harvey Norman boss Gerry Harvey said there would be “blood on the streets” in the retail sector because business is so bad, the worst since the recession of the early 1990s.

“It’s a crisis, the worst in 20 years,” he said.

“There is a recession in retail right now. Boxing Day sales have had to come early because retailers need to sell something to pay their staff.”

The news comes as the Government announced an inquiry into the future of the retail sector to examine issues of competition, and the $1000 GST and duty-free threshold on overseas shopping.

Australian retailers and shopping centre owners have formed an alliance to try to persuade the government to abolish the $1000 GST-free threshold. They plan to spend millions on an advertising campaign to try to have imported goods subject to tax and import duty. Mr Harvey is not alone in his bleak outlook.

David Jones and Myer are offering discounts of up to 40 per cent across all departments in their Sydney stores, saying it was the toughest environment for years.

“Retail is challenging right now and to drive people into stores we are offering significant discounting,” Myer spokesman Mitch Catlin said.

“Every retailer is doing it. It is the best final week I can remember for consumers going into Christmas.”

David Jones described its sales as “patchy”.

Retailers traditionally make up to a third of their annual profits in December, but sales are down across the board as stores battle plummeting sales, shrinking profit margins and increased competition from overseas websites.

Russell Zimmerman, executive director of the Australian Retailers’ Association, said he’d never seen tougher conditions in 30 years.

“We’ve had 43 per cent of our retailers reporting sales figures for the period from December 5 to 11 at below last year’s levels. To have so many suffering falling sales is terrible.”

He said consumers have been affected not only by rate rises and higher utility bills but also spooked by events overseas. “They’re seeing economies such as Greece and Ireland in crisis and they’re getting worried,” Mr Zimmerman said.

He predicted retail sales of $39.9 billion, a 3.5 per cent rise on last year or about half the usual increase. He said this may force retailers to cut staff hours or cut back on casual workers. “We’re hoping for a good last week into Christmas,” he said.

5 Responses to “Australia”

  1. Rodger Mitchell Says:

    Warren, sounds like Australia is acting like a Monetarily non-Sovereign nation. I would laugh at their ignorance except our President and our Congress and our media and most of our economists would like us to act that way, too.
    .
    Sadly, when Australia’s economy tanks, and their government is forced to deficit spend, which then will stimulate their economy, neither our President nor our Congress nor our media nor most of our economists will have learned anything from that experience.

    Rodger Malcolm Mitchell

    Reply

    Mr. E Reply:

    I agree. I expect first an implosion as the carry trade unwinds, then a mad meltup as the scramble for AUD begins.

    However, this lucky country will have a crisis in the middle of a U.S. recovery – the best time. A booming U.S. economy solves lots of problems.

    Reply

  2. Senexx Says:

    I think we can all agree that neither the US nor Aust. have sufficient deficit spending at present. Sadly the mainstream economists believe we’re approaching full employment in Australia at about 5% unemployment based on the mythical NAIRU. Employment is currently 5.4% with around 7% underemployment.

    As for the Department Stores mentioned above, it is no surprise they’re crying poor, they charge through the nose to start with. Harvey Norman included. The difference is when Harvey Norman have a sale, their prices become reasonable.

    Whilst I do agree that Aust. will have an economic slump but at this stage I must disagree with it being during a US recovery – there is no sign of recovery in the US in the near future.

    PS. Long time reader, first time commenter – please be kind.

    Reply

    Tom Hickey Reply:

    Hi Senexx, watch the US declare 8% unemployment to be “the new normal” due to the emergence of intractable structural unemployment. It already being “debated” in the conservative universe of discourse.

    Reply

  3. Senexx Says:

    Sorry, the above comment should read “insufficient deficit spending” – feel free to correct and then delete this comment.

    Reply

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