6% surge in spending buoys faith in cash splash
Peter Martin
July 2, 2009
AN EXTRAORDINARY surge of cash washing through checkouts has helped vindicate the Government's cash splashes, pushing retail spending to yet another record high in May, the fifth since the stimulus payments began.
In the midst of the global financial crisis and amid climbing unemployment, Australian consumers spent a record $19.5 billion in May, a full $1.1 billion a month more than before the payments in November.
Retail spending has climbed 6 per cent in the half-year since the payments began, after climbing only 1 per cent in the half-year before.
In Victoria, sales surged 5 per cent after climbing 3 per cent in the half-year before. The turnaround was starker in economically weaker NSW where sales soared 7 per cent after previously contracting 1.3 per cent.
Clothing and soft-goods sales led the way, surging 14 per cent nationally in the half-year since the payments began after sliding 1.6 per cent in the half-year before. Department store sales have climbed 12 per cent after sliding 2.6 per cent.
"Consumers are fired up to spend despite the storm clouds of imminent recession," said Commonwealth Bank economist John Peters. "We've had three stimulus packages, in December, March and April, and from this month the tax cuts promised in the budget. Every sector of retailing is performing better than before the stimulus measures, a fact that must engender some further fear and loathing in the stubborn sceptics."
ICAP Securities economist Adam Carr said: "Obviously retail spending has been buoyed by the hand-outs. But there is more to it than that. Consumer confidence has bounced sharply, incomes growth is solid and when you add to that historically low interest rates and a labour market that is so far holding up well - I don't think we'll see consumer spending wane."
Treasurer Wayne Swan said the 6 per cent surge showed the stimulus packages were working. "If you compare our retail sales to say those in the United States, during that period they went backwards 2.2 per cent. So it's very encouraging."
Shadow treasury spokesman Joe Hockey welcomed the news, saying it demonstrated the underlying resilience of the Australian economy, but he said it was not yet clear that the stimulus payments had been value for money. "The majority of them have still been saved … Over time we will get the full picture."
Retail spending accounts for 25 per cent of gross domestic product, and the broadest measure of consumer spending accounts for 60 per cent, making it possible that the spending boom will propel Australia into another quarter of positive growth in the three months to June, delaying further the prospect of a so-called "technical recession".
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There's too much conservative opposition. Can't be bailing out the little guy, after all. 
It's their own fault and we can't risk moral hazard. 
