Australian Bureau of Statistics figures released today show Australia lost 29,300 jobs in December. For the year, there was close to no new jobs created making job growth last year the worst since 1992.
Unfortunately this year is not expected be any better. Excessively high levels of household debt and house asset prices has seen growth in mortgage lending fall to levels not seen since world war II and left banks no choice but to start slashing staff numbers. UBS expects banks will slash 7,000 jobs over the next two years as banks align to a lower growth environment.
And pain is not limited to mortgage lending. Australian households are trying to deleverage after a decade of binge spending where households spent more than they earned for a number of consecutive years. Rising property prices and the wealth effect made spending beyond your means not only fashionable, it also appeared sustainable. It wasn’t as if you didn’t have the money, it just wouldn’t be realised until the sale of your home.
Household net savings have now sprung back to around 10 per cent to levels not seen in 25 years coincidently starting the same month than the collapse of Lehman Brothers. The paying down of debt and extra savings is thought to have wound back some discretionary spending, causing retail sales to decline and making it the worst period for retailing in a couple of decades.
IBIS World’s Ian MacGowan told the Sydney Morning Herald, “The period from 1998 to 2008 was a boom time, a golden era, for retailers, with well above average growth as Australians spent large sums on their credit cards and hire purchase”
This supported extra retail jobs that are no longer needed today with more prudent discretionary spending. Andrew McClennan, a retail analyst with the Commonwealth Bank said “there is no doubt there are going to be significant layoffs through further business failures.”
Some analysts are expecting a wave of retailers entering administration in March, while others will close stores and/or layoff staff.
» Thousands of bank jobs face axe: UBS – The Sydney Morning Herald, 16th January 2012.
» Retailers brace for job cuts – The Sydney Morning Herald, 18th January 2012.
» Debt Bubble Cripples Retail Spending – Who Crashed the Economy, June 8th 2011.