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Wages growth vital to retail growth

Mark Fletcher
August 6th, 2019 · 5 Comments

I agree wholeheartedly with this report by Greg Jericho in The Guardian. Below is a selection or pars from the report.

Tax cuts won’t pry open household wallets.

Last week the latest retail trades figures revealed that in the past 12 months the volume of retail spending, in seasonally adjusted terms, grew by less than at any time since the 1990 recession. The trend measure was less terrible – it suggested that the level of growth was only the worst it has been since the depths of the GFC.

In the past nine months the volume of retail trade has not grown at all. That’s recession-level spending.

That we are spending that weekly when the unemployment rate is 5.2% tells you a lot about how poor that measure has become for explaining the state of our economy.

And it is not the case that the bad news for households is contained to only some parts of the country. All states except Queensland have seen the volume of retail spending growth fall.

At this point the government is betting on the tax cuts fuelling an increase in spending. It should in the short-term, but without wages growth no household is going to think about increasing their spending long-term.

And the most troubling thing is the drop in inflation expectations and those for the cash rate have occurred not just since the government was re-elected but since the tax cuts have passed into law.

Few seem to think they will do enough, and instead we continue to look to the Reserve Bank to come to the rescue.

In my opinion, only wages growth can increase spending. People on a minimum wage, Newstart and other social programs, young families living pay to pay … these are the core fuel for retail, these are the people who will spend every extra cent they receive.


Category: Newsagency challenges · Newsagency management · retail

5 responses so far ↓

  • 1 Graeme Day // Aug 6, 2019 at 7:29 PM

    Interesting theory.
    wages before earnings? Business didn’t start with wages forst then tailor the profits to match.
    There has to be so much production to afford ex amount of wages to produce the amount needed to pay all other expenses plus the return on investment.
    Something that neswagents are going through right now their input isn’t bing repaid accordingly so they as you promote they need to change their business model to earn more. This means further capital investment to get the extra.
    this What is the real problem is the assets such as houses etc and the cost associated with this investment takes up too much of the disposable income and the income itself doesn’t grow with asset costs it grows with production.
    recession is on the cards and an unjustified wages increase will accelerate unimployment and therefore deepen te recession.
    Asset prices need to fall or debt needs to be repaid so that more capital can be produced.


  • 2 Leon Tonna // Aug 7, 2019 at 9:04 AM

    I fully agree Graeme. Any growth in the economy has been fueled by dept. Interest rates need to rise but can’t or the economy falls over. Low interest rates are here for many years to come and heading lower. We can’t even create inflation to deflate the dept.


  • 3 Mark Fletcher // Aug 7, 2019 at 9:15 AM

    Not a theory. Economists around the world agree. Trickle down economics is not real. Tax breaks and benefits for the top and middle end of town delivery less economic benefit than extra dollars in the pockets of the poorest and most vulnerable. They spend. Retailers would love it.


  • 4 Graeme Day // Aug 7, 2019 at 11:40 AM

    Mark, Sorry Economists are theory -that’s my point.
    I stand by what I said as the Economists have one theroy that is Rote learning. Spending patterns Govern the real economy and the economist only receive these after the event. leoan says it all “we can’t create inflation to deflate the debt”
    The economists lower the interest rates for our balance of payments in overseas Trade and we locals suffer even more.
    That’s economists for you.


  • 5 Colin // Aug 8, 2019 at 9:51 PM

    For some time the private sector has felt at odds with the governments growth rhetoric.

    – seek vacancies down 8% year on year
    – 7.5% of workers in gig sectors
    – zero retail growth
    – low wage growth

    The government talks things up but with public sector employment making up all job growth. Now is not the time to legislate for higher minimum wages.

    What the government could do instead is clamp down on the below minimum wages routinely being paid. By large companies, in the gig economy, in the various contracted positions, in family firms, in poorly regulated industry sectors.


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