Business battles long-term memory loss
John Cavill isn't the only business person who thinks conditions are the worst in 36 years, or 30 years or their lifetime or “ever” - which makes one wonder what they were doing the last time Australia had a recession or whether Australia is suffering a long-term memory loss epidemic.
Retail conditions are not good and in some areas are bad, but this is not 1990-91 when we were suffering a serious and nasty recession brought on by interest rates in the high teens and featuring double-digit unemployment and a less generous social security safety net.
Going back 36 years would include the early 80s recession which wasn't much fun either.
The most recent Australian Bureau of Statistics retail sales numbers are getting a little old (February) but doing a previous-corresponding-period comparison for the latest three months shows retail sales on the trend measure were still up by a few per cent, roughly the inflation rate and a bit better.
Of course large parts of retail have been seeing deflation, rather than inflation, meaning there's actually more stuff being sold than current price sales figures indicate.
A quick look at retail sales performance in constant dollars for the three quarters to June 1991 shows falls of 1.7, 1.3 and 2.2 per cent on the previous corresponding quarters - inflation was keeping the turnover figures modestly positive, but the game was going backwards, just like the overall economy.
The level of business failures left the current softening in the shade. And for some broader anecdotal perspective, Mike Carlton nailed it in his Saturday column:
“The department stores that once studded the Sydney CBD are long gone. Grace Bros, Anthony Horderns, Farmers, McDowells, Waltons, Bebarfalds and Mark Foys vanished with the rise of the suburban shopping mall and the likes of Harvey Norman. Now, in his turn, the writing is on the wall for Gerry Harvey because Tim Berners-Lee created the internet and Jeff Bezos came up with Amazon.com. It's called progress.”
Not so bad
I'm not sure that Harvey-Norman is for the jump just yet, but you get the drift. Collectively, the business chatter in general and retail in particular seems to be suffering from the opposite of the Pythonesque “live in lake, get up before going to bed” syndrome – we're working hard to convince ourselves that we live in the worst of times when the hard statistics tell us that simply isn't true.
We have a marked tendency to have a distorted view of “the good old days”.
Just in the relatively short term, four years, we manage to forget the pain of the bubble we were in before the GFC hit and only remember the froth.
An example I like to use is to ask a room to guess what the headline bank standard variable home loan interest rate was in August 2008 - very, very few can recall that it was 9.6 per cent, more than 300 points above what is actually being paid for the average mortgage today.
Which is one of the more interesting things to contemplate about tomorrow's interest rate cut by the Reserve Bank: people's perception of it, rather than the actual number of basis points.
Even if the banks pass on the full 25 points, its impact on the average household doesn't add up to a lot. (For a start only about a third of us have a mortgage anyway.) And if the RBA went the big 50 points, that could send a dubious signal about the economy, a suggestion that we are in deeper trouble than the numbers tell us.
Perception is often more important than reality in the confidence business. That's why the rhetoric of the governor's brief statement tomorrow afternoon might matter more than the number of points shaved off a mortgage.
Michael Pascoe is a BusinessDay contributing editor.