We have yet more proof, if any was needed, of Australia’s 2-speed economy. There’s one speed for those directly and indirectly exposed to the mining boom. It’s fast, super-sonic in some places. Mining matriarch Gina Rinehart catapulting to the top of the top of Australia’s rich list, with an estimated fortune of $9 billion, is living proof. Close behind on almost $7 billion, is Andrew “Twiggy” Forest, another who has made a fortune from the red dirt of Western Australia. Then there are the stories many of us have no-doubt heard about those young guys and gals earning $150,000 per…
To keep reading, enter your email address or login below.
We have yet more proof, if any was needed, of Australia’s 2-speed economy.
There’s one speed for those directly and indirectly exposed to the mining boom. It’s fast, super-sonic in some places.
Mining matriarch Gina Rinehart catapulting to the top of the top of Australia’s rich list, with an estimated fortune of $9 billion, is living proof.
Close behind on almost $7 billion, is Andrew “Twiggy” Forest, another who has made a fortune from the red dirt of Western Australia.
Then there are the stories many of us have no-doubt heard about those young guys and gals earning $150,000 per annum driving trucks round and round, up and down giant open cut mines.
Great salary. Tough work in remote places in stinking hot weather. Good luck to them I say. They probably deserve the pay.
The Real Heroes
Back in the real world, there are the rest of us. Teachers and nurses, the real heroes of this world, earn $50,000 per annum. The average Australian wage is $68,000.
The average Aussie battler is struggling. Variable mortgage rates are back up at 8%. On a $350,000 mortgage, that’s a monthly repayment of $2,700. It doesn’t leave much left over for the necessities in life, let alone the odd luxury.
As for why a battling family has such a massive mortgage, well, we’ll leave the Great House Price debate for another day.
Given all that, it’s no wonder then that retail sales growth slumped to just 0.2% in December, according to the Australian Bureau of Statistics (ABS).
No wonder also that Myer (ASX: MYR) is doing it tough. Shares in the department store plunged 12% on Monday after a shock profit warning.
Beware Men In Sharp Suits
Blue chip shares don’t normally fall 12% in a day. But this was no ordinary profit warning, with CEO Bernie Brooks revealing there had been a 7% fall in foot traffic during Myer’s January stocktake sale.
Needless to say, it was a tough day for investors who piled into the much-hyped Myer re-float at $4.10 per share.
With Myer shares now trading at $3.30, it has been a quick and painful lesson as to why punters should be wary buying used goods from private equity consortiums.
Still, it didn’t stop Bernie Brooks splashing $42 million on a 65% stake in fashion label sass & bide. Not being one for high fashion myself, all I can say is for that price tag their threads would want to be pretty damn flash.
Interest Rates on Hold?
So what’s all this mean for interest rates?
Based on minimal sales growth in December, Myer’s tough January, and the struggling mortgage belt, you’d reckon the Reserve Bank of Australia (RBA) would be keeping them on hold for some time.
Even Treasurer Wayne Swan seems to be jawboning the RBA to go steady on the interest-rate lever.
Quoted in the Australian Financial Review, he said…
“Despite the Australian economy’s strong fundamentals and job creation, we’re seeing consumers take a more cautious approach to their spending, which isn’t surprising given the stream of difficult stream of news coming from abroad, particularly Europe. A high level of discounting by retailers also slowed sales growth in the month.”
Or perhaps it’s all just political spin? Nothing surprises with politicians.
Sex, Italy and A Pair Of Shoes
As somewhat of an aside, I’m not sure the UK’s woes, Ireland’s basket-case of an economy, or the Italian prime minister’s alleged sexual exploits, come too much into the thinking of Mr & Mrs John Citizen when they are deciding whether to buy that new pair of shoes.
“Those shoes are so nice. I wish I could buy them, but I better not. The mafia is allegedly holding compromising photos of Silvio Berlusconi.”
What is Wayne Swan on? Over-spin?
More Pain To Come?
Back to interest rates. Maybe do have further to rise?
Unemployment at 5% (effectively full employment) and the ANZ (ASX: ANZ) saying job ads in January soared 40.5% over the corresponding month last year, suggests the RBA will need to inflict more mortgage-belt pain.
If only they could work out a way to slow the speeding miners, and leave the rest of us to battle away…
Like a mining tax or something? Now there’s an idea.