We are stressed – and not spending: Gottliebsen

When the Australian sharemarket rose more than 1% yesterday, retailers selling to middle and up-market customers dared to hope that better times were ahead.

The low stock market is one of the forces which has affected Australian consumer stress levels and, in turn, impacted spending patterns.

Retailers have been looking closely at what is causing stress among Australians and among Australian consumers.

By chance, today, Suncorp revealed their analysis of what causes Australians the most stress. Suncorp says that the seven most stressful events are having your home and belongings destroyed by natural disasters; serious illness or injury; losing a job; getting divorced; having a child; moving house and getting married.

And Australians are more stressed about losing their job than they are about getting divorced.

But retailers are finding that their customers have restrained spending because of a different set of stresses. Those in lower income suburbs or in areas where there are many high mortgage/low deposit new houses, consumers are badly stressed by higher power, medical insurance, petrol and education costs on top of higher interest rates. Power charges are particularly stressful because homes have become totally geared to power consumption, particularly in hotter or cooler areas. These consumers have cut back their discretionary spending and retailers operating in those markets have suffered. Conversely the Coles lower price campaign is magnificently timed.

Then there is a second group of more affluent consumers who are being stressed by different forces. They cut back spending because the paper value of their sharemarket assets slumped and they were frightened that the value of their house, or house prices in general, would fall.

They are currently reacting to those stresses by saving like crazy and their savings have played a big role in boosting the banks’ deposit coffers.

Retailers like Myer and David Jones want the sharemarket to rise and want house prices to settle and begin to move up again so that these consumers will stop saving so much and restart spending.

US retailers say that the big rise in the American stock market is boosting their sales, particularly in areas where house prices have not been decimated.

In Australia one of the reasons house prices have held is that the avalanche of bank deposits have encouraged banks to maintain or increase their financing of houses. This is probably the biggest single force determining house price values. At the same time they have constrained developers by limiting finance. It’s a classic squeeze play – cutting the supply and boosting the demand.

In turn this is slashing bad housing debts, but it is not yet helping retailers.

This article first appeared on Business Spectator.