Good news and bad news

Although consumer sentiment has fallen by nearly double figures in the past year, the overall consumer confidence has now flat lined for the past couple of months and remains positive (especially when the political bias of respondents is taken into account).

The good news is for smart companies dealing with disappointing recent sales is that more than half the Australian population is still saying “now is a good time to buy” major household items – down 5% to 55%.

With the continued fall in the world’s sharemarkets, the admission by Shadow Finance Minister Robb that it’s going to be hard to find a further $70 billion in budget cuts and Wayne Swan desperately hanging on to seats as well as his surplus, is it any wonder that retailers are facing a further rise in discretionary saving?

In Australia we now have three blocks of consumers:

• Those who want an early election to give Tony Abbott the chance to become more positive who are badly spooked by the volatility in the equities market due.
• Those who expect an early election because Swan is so fixated on the postcodes of his patchwork economy that he can’t see the need to protect manufacturing jobs and can’t relate “clean energy” to the “great big new tax”.
• Those who hope that Julia Gillard will hold on long enough to hand out all those packages so that they can pay their ever rising utility bills to address their real fear of the RBA determination to disregard the impacts of another rate rise.

It is interesting to note that consumer confidence graphs merge these three distinct market segments into an average result that does not provide any real guidance. Surely, it’s time that Westpac and Gary Morgan show that their surveys are heavily shaped by domestic political responses to the last election as they are in Europe, the UK and the US. It is interesting in this context to note the report from Michele Levine of Morgan Research that shows Government supporters are more than 20 points (119.9) more confident than Opposition supporters (97.9)

Roy Morgan Consumer Confidence is virtually unchanged over the past four weeks though; now at its lowest level in more than two years at 107.9 (up 0.3 points) this week’s turmoil in world and local markets continues to provide a confusing picture about the state of the world economy. For more than two months since June 11/12, 2011 consumer confidence has remained between 107.6 and 110.5 and has not gone up or down significantly for consecutive weeks during this entire period.

Gary Morgan reports that there has been a 1% slide in confidence about personal financial situations and a similar fall in families expecting to be “better off financially” this time next year. Also falling is the number of Australians who expect “good times” for the Australian economy over the next 12 months – now at 24% (down 1%) – the lowest this indicator has been since June 13/14, 2009.

The highly indicative gold bug has had an attack of the Berkshire Hathaway’s with Warren Buffet paying $100,000 a share in the Bank of America and the long-term bond markets hovering around 2%, the speech of Ben Bernanke over the weekend may set the flag for a rare outbreak in optimism. In America the Obama administration has played its “get out of debt ceilings free card” and is now convening its super committee to pitch for further spending and tax cuts to encourage businesses to hire and consumers to spend.

There is only one real way to give the economy a boost – get people back into retail stores and discourage a flow on of wage rises from the three-speed economy. That is for a national commitment to enhance productivity, reduce structural under-employment and provide real support for smart companies to take on additional workers, provide on the job training and encourage multi-cultural outreach that focuses attention on increasing labour market mobility, skills training and major infrastructure investments.

The reality is that the political divide between short-term fear and longer-term optimism rather than fact will continue to drive business and consumer confidence over the coming year.

The bad news is that no Australian party is prepared to commit to abolishing payroll taxes and other measures that would provide incentives for Aussie companies to counter the trends in big business cutting staff, off shoring jobs and converting full-time to casual positions. The nation is looking for leadership rather than parties at loggerheads firing slogans across the aisle while jobs and confidence are under threat.

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Dr Colin Benjamin is an entrepreneurship and strategic thinking consultant at Marshall Place Associates, which offers a range of strategic thinking tools that open up a universe of new possibilities for individuals and organisations committed to applying the processes of innovation, creativity and entrepreneurship. Colin is also a member of the global Association of Professional Futurists.