The great divide

Better than expected rises in retail sales figures for July – up 0.5% (beating expectations of a rise of 0.3%) – confirm this emerging trend.

Luxury good sales like Hermès handbags confirm a greater sense that the high-end bonus classes are overcoming their resistance to premium retail sales, while the waged classes are still shunning the discount stores.

Tribecca Investment Partners Portfolio Manager, Sean Fenton, says that the gains in spending at department stores and restaurants is encouraging. “It shows the Aussie consumer is not falling off a cliff and could be the sign of a beginning of a bottom of that pressure that’s been on retailing.”

There is still a great divide in expectations between those that see Julia Gillard as toughing out the daily crises and those who fear that Tony Abbott, while assumed to be just around the corner to his life’s ambition, may not have the answers to the declining value of their homes and asset portfolios.

The gap between the consumer confidence of ALP voters (123.4, up 3.5pts in a week) and LNP voters (98.7, up 1.5pts) has continued to widen and represents a clear split in the community about the state of the Australian economy. 38% of ALP voters say their family is “better off financially” than this time last year compared to 27% that feel “worse off”, while only 24% of LNP voters say their family is “better off” compared to 38% that feel “worse off”.

Gary Morgan reports that consumer confidence has increased to 110.6 (up 2.7pts) – now at it’s highest since June 4/5, 2011. The rise comes despite Bluescope Steel’s announcement of 1,000 job losses early last week, but after BHP Billiton announced a record profit of $22.5 billion (up 86% in a year).

Gary says the rise in confidence about Australians’ assessment of their personal financial situations follows a week of gains on Australian sharemarkets on the back of BHP’s record profit announcement. Last week the All Ordinaries rose nearly 5% – and has continued its gains this week, and the Australian dollar, which rose from US$1.04 on August 22 to finish last week close to US$1.06.

Australia is now divided into those that are directly benefitting from the two-speed world of Asia’s growth and the West’s stagnation. The RBA is likely to hold rates constant for some time rather than reward the short-selling hedge funds that still believe that the Westpac sentiment index is a better predictor than the Morgan consumer confidence predictions.

We are now on a rising tide of recovery that will lift all boats and regenerate both business and consumer confidence. This is a consequence of a seriously divided world with China and India on the near horizon of industrial growth and Asia generally showing signs of continued benefit from investments in education and infrastructure.

Given that the Chinese Government will continue to maintain the growth of its millionaire factory, constrain inflation and follow the global trend of reducing artificial stimulus to generate trade, smart companies can continue to rely upon a return to growth this financial year, but will need to engage their staff in a little reality therapy to guard against an outbreak of labour costs.

China, the world’s fastest-growing major economy, had 502,000 millionaires last year, according to a study by Swiss private bank Julius Baer Group and CLSA Asia Pacific Markets. China’s millionaires may account for about half of the rich people across 10 major economies in Asia and hold more than half of the wealth by 2015.

The millionaires will more than double in number to 2.8 million, with 1.4 million high-net worth people in China, according to the report released yesterday that covered China, India, Thailand, Indonesia, South Korea, Taiwan, Hong Kong, Singapore, the Philippines and Malaysia. India will be the second-biggest market among the 10 economies by 2015, with 403,000 millionaires and a combined US$2.5 trillion in wealth, said the report, which excludes Japan. South Korea will be ranked third.

According to CLSA Asia-Pacific chief, Andy Rothman, while China’s export growth is expected to slow due to the weakness in the European and US economies, and their currency will appreciate about 5% against the US dollar, it will not have much impact on that nation’s rate of development.

State and private investments helped drive a 9.5% expansion in second-quarter gross domestic product the Government said in July, as growth in industrial output and retail sales accelerated and copper and aluminium production reached records.

Australian manufacturing, tourism and retail industries cannot expect to be protected from the reduction in the cost of imports from the markets that are giving us our surge in trade sales.

What they can expect is that the tax forum at the end of the year looks at ways to encourage the growth of new innovative and entrepreneurial ventures by delivering on lower barriers to interstate and international trade, cutting payroll taxes and providing guarantees to the energy utilities to enable them to cut the input costs of small and medium employment generators.

For more Futurist blogs, click here.

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.