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Ripper retail numbers will raise rates and immigrants will be blamed

Peter Switzer
31 October 2023

We got bad news yesterday with ripper retail numbers in September making it harder for the Reserve Bank to resist raising interest rates on Cup Day. And the irony with that is the biggest cause of this surge in shopping is not people with home loans snubbing the RBA and spending even as their repayments go through the roof, it’s because of a record rise in immigration!

So, people without home loans (immigrants) look like they will cause those with home loans to cop higher rates of interest. You can see why economics is called the “dismal science”.

But it’s not just immigrants, gardeners, DIY home improvers, travellers and baby boomers who are shopping and not dropping at the moment.

The current immigration story is quite surprising. The immigrant population is 2.5 million out of a total population of around 25.7 million people but 10% of that 2.5 million are temporary visa holders. And over the past year, 500,000 have come here and lots of these have influenced the retail numbers.

That doesn’t surprise me, given most of my overseas holidays have time allocated to browsing the likes of H&M, Zara, Marks & Spencers, Saks on Fifth Avenue and of course Le Bom Marche in Paris. And I don’t even love shopping!

This is how The Australian’s Matt Bell reported the September shopping spree: “A record spike in immigration has contributed to the biggest growth in retail turnover since January as the nation spent up big at department stores in September, increasing the odds that the Reserve Bank will be forced to lift interest rates next Tuesday.”

That’s the story in a nutshell and UBS economist George Tharenou threw this in, showing that the bad news is only short term: “For population, growth is around the fastest in 50 years. This is adding to inflation pressure in the near-term, especially via rents. Over time, this will improve labour supply, and help to ease some of the tightness in the labour market; but for now, the bigger impact is boosting demand.”

Only a year ago when inflation was building, baristas were getting over $60 an hour on weekends and dishwashers at Rockpool Bar & Grill were getting $90 an hour on Friday and Saturday nights!

The SMH reported that Restaurant and Catering Australia chief executive Belinda Clarke said: “One kitchen hand in WA was poached by the mines for $150,000 a year as well”.

Until this Aussie shopper surprise there was a 60% chance of a rate rise on Cup Day, but now it would be more like 70% plus. If these strong numbers persist, we could see another rise. “The September retail data today reinforces our view the economy is surprisingly resilient and adds to the case to hike in November. Indeed, if this continues, it adds to the risk of an additional RBA hike of 25 basis points to 4.60 per cent in February 2024,” Tharenou said.

But wait, are we getting carried away on one month’s numbers?

“ABS head of labour statistics Ben Dorber said while the rise in September was the largest since January, subdued spending for most of 2023 means underlying growth in retail turnover remains historically low,” Matt Bell reported. “The warmer-than-usual start to spring lifted turnover at departments stores, household goods and clothing retailers, with more spending on hardware, gardening, and clothing items.”

If there are arguments for the RBA to hold fire on rate rises, some economists have looked past September and made the following key observations:

  1. As retail was up 2% but population rose 2.5% over the year, households are spending less.
  2. ANZ says overall household spending is weakening and is expected to keep doing so over 2024.
  3. Accenture’s FiftyFive5 arm data showed spending for pub, donations, gambling and takeaway were down by as much as 13% in the 12 months, with 50% more going on utilities, groceries and petrol.
  4. Purchasing of big items such as furniture and electrical goods are being deferred.

Against this, the data shows gardeners and DIY home improvers continued to spend in September, while intrepid travellers seem to be still trying to play catch-up, following the locked-up days of the pandemic. Meanwhile, baby boomers without home loans are not hit by rising interest rates but in fact are enjoying term deposits at 5% after years of enduring 1% returns.

Did I say economics was a dismal science? I only hope RBA Governor Michele Bullock doesn’t add to the dismalness by raising rates on Cup Day.

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