Who'd have thunk it? Not me, Not Malcolm
A $900 million surge in consumer spending took retail sales to an unexpected all-time high in December, helping vindicate the government's strategy of economic stimulus payments, now under attack from the Opposition which says it will attempt to block the next round in the Senate.
Acknowledging that his decision would not be popular, Opposition Leader Malcolm Turnbull it was the right decision and that most Australians would "recognise in their hearts" that it was right.
Shortly after he told Parliament that there was no basis for concluding that December's $8.7 billion "cash splash" in December had been effective, the Bureau of Statistics reported that December had seen the biggest monthly jump in sales since the start of the decade.
Calculations by The Age suggest that the December cash splash boosted sales in that month by at least $884 million - roughly one tenth of the cash splashed and in line with the Treasury's expectation. The Treasury expects another third of the cash splash to be spent during the first 3 months of this year and another third to be spent during the next 3 months.
The Age's calculation is conservative as it assumes that without the splash December sales would have been 1.9 per cent higher than they were a year before, in line with the trend growth in sales in the year to November. But trend growth had been deteriorating at the time in line with deteriorating economic conditions...
In fact sales in December were 5.6 per cent higher than the previous December, and 3.8 per cent up on November.
"The bonus cheques had an obvious effect," said Commonwealth Bank economist Sara Hoeing. "If there were any doubts about the efficacy of government stimulus packages and consumers' willingness to spend, this news is a clear rebuttal."
"The hoped for boom in spending was more than delivered," said TD Securities economist Joshua Williamson. "All groups of retailers recorded increases with department stores up a staggering 8.3 per cent. Spending on household goods was up 9.9 per cent; clothing and soft goods up 5.8 per cent."
So unusual was the December boost that the Bureau of Statistics suspended publication of its trend estimate of spending, arguing that it would not be meaningful in the face of such an "irregular event".
A Bureau spokesman told The Age that such a decision was itself highly unusual.
Industry consultations conducted by the Reserve Bank and reported to its board suggest that the boost to spending continued throughout the first half of January and then eased as spending returned to its earlier weaker trend.
Building approvals approvals data released Wednesday indicate that the rest of the economy is very weak. Approvals fell 2.9 per cent in December and 10.9 per cent by value despite lower interest rates and despite expanded first home owner grants. Over the year to December they were down 33 per cent. Approvals in Victoria fell a more modest 17 per cent, with most of the decline centred in Queensland.