When consumer confidence is down, it seems the natural behaviour is to cut back on spending, build buffers and generally stick to necessities. For example, we might not holiday this year instead we will stay at home. This seems the right course of action. Right? Wrong! It’s exactly the worse time to do such things as it brings more and more job losses until we cause the dreaded recession word. Something we haven’t had to endure since 1991.
The first industries hit tend to be the discretionary spend i.e. restaurants, doggy day cares and leisure providers. We can see this playing out in the suburbs around us right now. Lots of businesses closing down and for lease signs propping up everywhere.
A buyer’s strike – eventually leads to more job layoffs and unemployment which further worsen the economy and the living standards of Australians. People sit on their hands at this time – there is no urgency to buy, why buy this week when it will be cheaper next week.
This brings deflation to the table – as bigger enemy as too much inflation, but how will we get out of this one. See interest rates are already low, and with minimum growth in wages, do we have the spending power we need? It’s time for some strong leadership to act before the curve and keep the economy moving. Tax cuts are a start, but some big public spending is needed too.
What we need to be concerned about is forced selling. Investment properties are quite easy to manage when you’re fully employed and receiving rent, but they are the first things sold when families are unemployed or under employed.
Let’s keep the 27 years rolling and spend a little – goodness knows the retailers need it.