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RETAIL declines in the last quarter are the result of a spooked consumer and a ‘bi-polar’ economy, according to former Woolworths CEO and current Reserve Bank of Australia (RBA) director Roger Corbett (pictured).
The Fairfax Group chairman is facing challenges first hand in the larger retail space with declining revenues at Fairfax newspapers including mastheads The Age and the Sydney Morning Herald.
Corbett told Gold Coast Business News at a recent Australian Institute of Company Directors (AICD) event that the economy is now ‘mining and the rest’.
“Fundamentally this is a fiscal issue,” he says.
“We’ve got really big takes in jobs and opportunities in Queensland and Western Australia. There’s an enormous amount of resources going into the mining industry and its development and you’ve got a very retracting market in the remainder. So 20 per cent of the economy may be really booming, but 80 per cent of the economy is struggling.
“It’s because of the high Australian dollar, those industries depending upon exporting product and a factory or import of tourists. Retailing you would expect to be going the other way.”
ABS retail trade figures show that Australian retail turnover fell 0.5 per cent in March 2011, following an upwardly revised 0.8 per cent rise the previous month. The greatest fall recorded was in Queensland (-2.9 per cent).
National turnover fell in department stores (-3.0 per cent); food retailing (-0.4 per cent); household goods retailing (-0.3 per cent); other retailing (-0.1 per cent) and cafes, restaurants and takeaway food services (-0.1 per cent). A slight recovery occurred in clothing, footwear and personal accessory retailing (0.1 per cent).
Australian Retailers Association (ARA) executive director Russell Zimmerman, says department stores were the biggest losers but sales were poor across the board.
“Disappointing retail trade is a sure sign to the government that household discretionary spend is tighter than ever,” he says.
“Queensland – the state hardest hit by floods and cyclones – posted the biggest monthly decline in sales of any state (2.9 per cent).
“Year-on-year growth for March is also well below the current rate of inflation at 2.2 per cent and is yet another blow to the sector that has been struggling with poor trading conditions for over 18 months.”
Corbett is at a loss to explain the consumer strike, but says lack of spending is holding off interest rate rises.
“Everybody’s got a job, most people have some discretionary income, but there is a constraint in the Australian community, which is helping to constrain interest rates as well,” says Corbett.
“I don’t quite know the reason for it, but it is probably because the average Australian citizen understands the variables we’re talking about and thinking conservatively.”
Corbett took over as Woolworths CEO in 1996 following an established career at Grace Bros. When he started the share price was $3.50. In the decade that he helmed the supermarket giant, shares had escalated to $28 – soaring market cap from $3.5 billion to $33 billion.
“It was a wonderful ride,” he says.
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