"Fast track to the present day and Aussie consumers are feeling decidedly more uncertain. People were just starting to realise that that the global financial crisis was ending when the Reserve Bank started lifting interest rates. And this was no gentle exercise – the rate hikes were the most aggressive in 16 years.
The rate hikes together with higher utility charges have represented a major hit to budgets at a time when many have not seen their wages return to ‘normal’ levels. And businesses are still very cautious about granting pay rises. Sure, people have held onto their jobs, and are generally happy about life. But the mood is different. People aren’t willing to spend unless the goods are ‘on special’. The perception is that budgets are under pressure and people feel that they need to respond by trimming debt and cutting back on the luxuries.
This is the mood we have sensed on travels across the country in the last few months. A mood of conservatism. The simple fact is that having a job is no guarantee that people will spend. If they don’t have to spend and are still uncertain about the future, then they won’t. Thus the low reading for the CPI. Plenty of discounting by retailers and other consumer-focussed businesses to get people into the stores and get stock moving.
It’s important to note that the ‘new conservatism’ is international. In the US, Europe and New Zealand people are making harder choices about their purchases and debt is still being shunned. In the late 1980s there was ‘irrational exuberance’, now there is ‘new conservatism’.
Clearly this trend also extends to investments as well. In the 1970s and early 1980s the sharemarket price-earnings ratio held near 10-11 rather than the long-term average of 15-16. A return to those risk preferences may be on the cards. In short, risk is out, conservatism is in."
