Shock news this week: the volume of Australian retail sales is shrinking at its fastest pace since the 1990s recession.
But Aussie shoppers have finally run out of steam, too. Despite deep price discounting and cutthroat competition among retailers, consumers are keeping wallets shut amid tepid wages growth., not to mention the smiling face of Japanese tidying guru Marie Kondo, with her exhortation to the masses to expunge from their homes whatever doesn’t “spark joy” .And so, the greatest consumption boom in human history, fuelled by international trade of cheaply produced goods, appears to be at an end.
Another American economist of the era, Irving Fisher, lost his entire fortune during the 1929 stockmarket crash and endured public humiliation by continually predicting stocks were about to turn up. They didn't. Not for a decade. But when inflation is low, this is less true. Consumers respond by curbing their spending to get ahead on their debts.
According to Reserve Bank calculations, for every dollar of housing debt, Australian households now have 16 cents stashed in offset accounts and redraw facilities. It took a decade for the world to pull out of the Great Depression – not helped by premature action by central banks to lift interest rates.
Jess_Irvine If only there was some kind of large scale investment needed that would support aggregate demand... decarbonisation perhaps?
Jess_Irvine why don't you explain or write about the role of mortgage credit in making us wealthy via wealth effects? The economy needs high immigration and more adult lending to drive retail spending.
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