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by: Jessica Irvine National Economics Editor
  • From: News Limited Network
  • September 16, 2012 12:00AM

Jessica irvine

News Limited economics reporter Jessica Irvine. Picture: Sam Ruttyn Source: The Sunday Telegraph 

TWICE a year on a Sunday, my local council arranges a “hard rubbish” collection day. For nosy-parkers like me, it’s a wonderful opportunity to legitimately rifle through neighbours’ rubbish as they leave it on the curb for collection.

A few years back, hard rubbish day saw footpaths transformed into makeshift, outdoor lounge rooms as new-looking lounge suites, televisions, lamps, throw rugs and cushions – unwanted, but in pristine working order – were relegated to the street.

This year’s Spring clean out was different.

This year the stuff people put on the streets really was just trash; bits of old wood, broken garden chairs, busted suitcases and soiled mattresses. And there seemed to be less of it.

What changed?
During the property boom of the early 2000s, Australians embarked on a debt-fuelled spending binge. A halving in interest rates since the mid 1990s meant families could afford to borrow twice as much. Banks were more willing to lend.

Supported by rising incomes and low unemployment, we went on a spending splurge. House prices boomed – more than doubling in a decade. Australia’s debt to household income ratio soared above 150 per cent – one of the highest in the world.

During the height of the property frenzy in the early 2000s, one in 12 Australian homes changed home each year (it has since dropped back to one in 25). As we moved, we treated ourselves to a few housewarming presents: new furniture and appliances – all on the plastic, of course.

At the same time, the rise of China meant the price of imported appliances, furnishing and gadgets plummet. We stuffed our homes with them and we kicked our old – but still perfectly good – possessions to the curb.

That was then.

Today, it’s an entirely different story.

The GFC was an almighty wake up call for Australian households. Our love affair with debt had already turned sour in 2006 and 2007 as the Reserve Bank lifted interest rates to eye wateringly high levels to cool the inflation created by all this spending.

When the US investment bank Lehman Brothers collapsed in late 2008, sending shockwaves through the global financial system, households really battened down the hatches. Interestingly, the crisis gave households both the motive – uncertainty – and the means –lower interest rates and stimulus money – to start saving again. We took that first stimulus cheque and have been squirreling away as much savings as possible ever since.

It’s a double whammy for industries like retail and tourism who are also struggling against a high Australian dollar created by the mining boom.

Retailers’ annual revenues grew by about 8 per cent or more during the early 2000s. Spending is now down to around 4 per cent growth a year – more in line with annual wages growth.

But is it only a matter of time before we return to our big spending ways?

I suspect not. All the signs suggest the Australian consumer mindset has changed fundamentally. We have turned our back on debt. More of us are ahead on our mortgage payments. Our credit card balances are shrinking. New loans are down. We are treasuring our possessions once more.

We have become more conservative with our finances. When asked to nominate the safest place for our savings, the proportion of us saying “in the bank” is at a 38 year high. The proportion saying “in shares” is at a record low. National accounts figures suggest households are saving about 12 cents in every dollar they earn, reversing the trend of the early 2000s when we spent more than we earned.

Economists call the trend “deleveraging”. It’s what makes the downturns that follow credit crises so protracted. We want to pay down our debts before we can start spending again.

That is bad new for jobs in the retail and property sectors of the economy, which are likely to remain on the ropes for some time to come.

But it is good for the long term stability of our economy, helping us to build a buffer against uncertain times.

Even if it does make trawling through your neighbours’ trash less rewarding.

Average credit card balance in July, down 2 per cent (or $69) on the previous month – the biggest percentage fall in 18 years.

15 million
Number of credit card accounts in Australia – up 1 per cent over the year

35 million
Number of debit card accounts in Australia – up 6 per cent over the year.

Annual growth in retail spending in 2003.

Annual growth in retail spending over the year to July.

Increase in the value of outstanding home loans over the year ended March 2004 – the peak of new home borrowing.

Increase in the value of home loans last financial year.

Per cent of Australians who say the wisest place for savings is in the bank – the highest reading in 38 years.

Per cent of Australians who think shares are the wisest place to put savings – the lowest reading on record.

Jessica Irvine is News Ltd’s national economics editor.

Adele Ferguson

May 19, 2012

"Showrooming" ... a new craze allowing shoppers to compare prices by scanning barcodes. “Showrooming” … a new craze allowing shoppers to compare prices by scanning barcodes. Photo: Joe Armao

IMAGINE walking into a department store, trying on a pair of shoes or moisturiser, then pointing your mobile phone at the barcode to get a list of real time pricing information from competitors offering the same pair of shoes or facial cream a few dollars cheaper just a few doors away.

It is a phenomenon known as ”showrooming” and it is causing headaches for traditional retailers in the US, who are already under siege from the online price discounting that has wreaked havoc with their business models. For customers, the mobile commerce apps give them even greater power to compare prices while they are shopping.

In Australia, a few retailers have started experimenting with mobile apps but they have a long way to go to catch up to US retailers, says Paul Budde, a telecom consultant at BuddeComm.

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Mr Budde estimates smartphones have more than 50 per cent penetration, which means it is only a matter of time before the apps are offered in Australia.

Woolworths was the first big retailer to launch an app last August, with limited offerings, which included the ability for customers to scan a product’s barcode with their smartphone, add it to their shopping list and then order and pay for their groceries, which are home delivered.

Big W went a step further and launched a mobile app in November, with a feature enabling customers to scan a product in any competitor’s store and get the comparable price at Big W. In the next few weeks, it plans to expand the price comparison to over 60,000 products and offer detailed product information on more than 20,000 items.

A spokeswoman for Big W, Clare Buchanan, said the upgrades will connect to online shopping to enable customers to compare prices as well as buy instantly from Big W for home delivery or layby.

”It will also give customers tracking information about the progress of their order and SMS them when it’s about to be delivered – this feature alone is anticipated to reduce call centre volumes by about 25 per cent,” she said.

Sportsgirl is another early adopter of mobile commerce. The group’s strategic brand manager, Prue Thomas, said the decision to introduce a mobile app was a no brainer and it was growing faster than website sales.

”Our girls are on the phones 24/7 and we should be too. They can purchase as much as they want from the mobile. If they are in a store that doesn’t have the product, they can use the mobile to order it,” she said.

Ms Thomas said Sportsgirl sees the mobile not as a threat but an opportunity.

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Rachel Wells

May 11, 2012

The deals being negotiated between local importers and international brands could bring an end to the heavy discounts shoppers now enjoy online. <I>Graphic: Liam Phillips</i>The deals being negotiated between local importers and international brands could bring an end to the heavy discounts shoppers now enjoy online. Graphic: Liam Phillips

AUSTRALIAN consumers will be forced to pay substantially more for their favourite fashion brands as a growing number of local importers reach agreements with international brands to stop selling their clothes to Australians on overseas websites or to lift their web prices.

While this will be welcome news to the country’s struggling retailers, it means shoppers will no longer be able to save up to 50 per cent by buying labels from overseas.

The distributors, who typically have exclusive wholesale rights to some international brands in Australia, say they have no choice while the government refuses to lower the $1000 GST-free threshold for imported goods.

The International Fashion Group's Jacki Bresic at a Toorak boutique yesterday: "It is the only way we can compete."The International Fashion Group’s Jacki Bresic at a Toorak boutique yesterday: “It is the only way we can compete.” Photo: Eddie Jim

Jacki Bresic, of the International Fashion Group, last month reached an agreement with popular US denim brands Paige Denim and AG Adriano Goldschmied to prevent major international online stores, including the Amazon-owned Shopbop and Revolve, selling their jeans to customers here.

Meanwhile, celebrity denim favourite True Religion agreed it would continue to sell to Australians – but at a higher price.

Ms Bresic said she was working with her other import brands on the issue.

”It is the only way we can compete on price with these overseas websites and try to prevent more and more retailers from closing their doors,” she said. ”When you’ve got overseas websites selling the same pair of jeans for $100 or $150 cheaper because they don’t have to pay the outdated taxes and duties that we do, then what hope do we have?”

Mattias Friberg, director of Some Agency, which imports Swedish brand Dr Denim, said preventing international websites from selling to Australian consumers was the best ”Band-Aid” approach to stop the flow of sales going offshore.

He has negotiated with Dr Denim to prevent UK online fashion giant Asos selling the brand to Australian shoppers.

He said brands such as Dr Denim were agreeing to limit sales to Australia or to sell at higher prices because it helped to ”protect the integrity of the brand and the retailers who have supported the brand in this market for many years”.

The Age is aware of at least half a dozen fashion distributors, some who import up to a dozen brands, who have reached agreements or are negotiating to set prices or limit supply to Australia.

The increasing trend of retailers blocking access to US websites has also led to a rise in companies that forward items on to Australia for a fee.

The Australian Competition and Consumer Commission did not want to comment on individual cases, but a spokesman said ”impediments to emerging competition involving online traders is an area of priority”.

”Certain behaviour employed to underwrite regional pricing strategies can in some circumstances raise concerns under the competition provisions.”

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