High Costs Begin to Bite Hard

A diversion from housing today albeit there are some inevitable links.

It's funny, isn't it, how the perceived increase in the cost of living never appears to be reflected in the official government stats? High inflation has consequences for wage settlements and interest rates, of course, and the last thing the Aussie housing market needs now is another round of rate rises, while the tax-payer could do without being saddled with a higher public-sector wage bill. That said, if the RBA needed an excuse to raise rates again, I'm sure inflation could be made to 'rise' again.

My friends at the Courier Mail ran with a story yesterday suggesting that as many as 40% of Queenslanders are now struggling to make ends meet, given recent hikes in food, utility and fuel prices. While I've personally been aware of the sharp increase in the cost of living, even I was shocked at the 40% number, which, if accurate, is even more of a reason to worry about the medium-term future of the housing market in Queensland. The theory goes that home-owners will hang onto their homes for grim death and will sell the shirt off their backs before handing the keys over to the bank and I'm willing to go along with that, but default willbe unavoidable for an increasing number of us, while the tought of "trading up" will be furthest from our minds. It's this trading up (along with plentiful credit) that keeps the housing Ponzi going -- and prices going up. If moving or trading up stops and first home-buyers (FHBs) disappear, the pyramid effectively starts to collapse on itself.

But enough of housing because that isn't today's bugbear. No, today my bile is reserved for Australia's large and dominant retailers -- you know, the ones that had a public whinge about Australians shopping abroad online. The Australian Dollar, as everyone knows, has appreciated north of 30% against a basket of major currencies over the past 2yrs and this makes the Cost of Goods for Australian retailers a hell of a lot cheaper. However, instead of passing on these savings to their customers the greedy retailers have decided instead to pocket the higher margins while throwing the odd bone, in the form a few "Specials", our way.

Then, when the consumer, fed up to the back teeth from being gouged by the likes of Gerry Harvey and friends decides to shop abroad, GH and Co get shirty and try to force the government to tax these imports. I firmly believe most Australians get what's going on here, and that being the case, I only hope for the sakes of these retailing tycoons that they have adequate security, because the people they've been merrily robbing all these years have a right to be furious with them. A high Aussie Dollar should be helping to mitigate (through cheaper foreign imports) the inflation being felt in other areas, but it isn't -- thanks to a few money-grubbing retailing types. As the non-resources part of the economy continues to struggle, so too will Australia's big retailers and I can't say that I'll be shedding a tear as their earnings progressively slip into the abyss over the next year or two.

No doubt they're furiously lobbying the government as we speak, threatening headline grabbing redundancies if the government doesn't act -- lobbying that's sure to intensify the closer to the next election we get. Of course, this would require Tony Abbot's LNP to come out behind the retailers on a "save Aussie jobs" ticket, a noble cause, no doubt, but one that I believe would be a nail in Abbot's coffin, because Australians have simply had enough.