The state of the economy at the street level

[Tyler Durden]

This has probably been going on for a while since the GFC, but retailers are STILL in a ever-lasting sales mode. One example is a shop in Broadway Shopping Centre (NSW). I swear it has had 3 closing down sales in the past 2 years, each time offering up to 70% off and yet it is still open!

Yeah I would like to know what the law as to that is. I mean, is there a time limit as to when it is closing down? A month? 2 months? A year?

I suppose technically they could have Company A own it, advertise a closing down sale, sell it to Company B, advertise it's own closing down sale, sell it to Company C and so on.

 

[LinRegSlope]

I used to work at the front end (commercially) on major resource projects, either O&G (onshore processing) or Mining (Iron Ore). The majority of people I keep in contact with in this field are either unemployed, recently made redundant, or struggling to hang on to their jobs. Contract rates are well down, and supply of people easily outweighs job demand regarding roles on offer.

 

[Smurf1976]

I swear it has had 3 closing down sales in the past 2 years, each time offering up to 70% off and yet it is still open!

It's like those people who sell Persian rugs. Their warehouses seem to catch fire alarmingly often (though strangely it never seems to damage the stock).

Never, ever, share a warehouse with one of these guys. At least not unless you also plan on having a "fire sale".

I spoke to the owner of a small manufacturer of electrical equipment last week. I won't be too specific to avoid identifying them (not too many manufacturers of electrical gear in Tassie....) but in short it's stuff that's used mostly in the commercial and industrial market and would be needed for new construction or renovation.

According to the owner, there was a huge slowdown a few months ago which he was assuming was related to the state election. But we've had the election and business hasn't bounced back, not at all it's still right down. He wasn't being political as such, just commenting that he'd assumed that regardless of who was elected, getting it over and done with might be good for business but this hasn't been the case.

Apparently it's not a case of them not winning tenders etc, there just isn't much work to tender for in the first place and they are now quoting on literally every job, no matter how small, they can find. Suffice to say he was very interested in knowing what works we might have coming up that they could tender for and pointed out that, being local, if we needed something in a hurry then they'd be more than happy to do whatever was needed to make it quickly. Apparently they have "just enough work to keep ticking over" but things sure aren't good.

Also had a visit from a salesman (actually the sales manager) from a company based in another state last week. They make some of the same items as the local company I've mentioned. So he's got on a plane, flown to Tas, on the off chance that this might generate a sale or two. Apparently he was flying to Melbourne the next day, then off to NZ.

Another one, supplier of custom built equipment (not electrical). They're offering a 40% discount if we take the one they've already got sitting there rather than building a new one that's very slightly different. Given that the one they've already got would have many potential buyers it seems that they're having real trouble actually selling things.

All of these relate to companies supplying equipment that would be used either for business expansion or to replace existing equipment which has a long lifespan. So it seems that there isn't much expansion going on, and that nobody is really replacing things until it's absolutely worn out and replacement is essential. In other words, businesses are conserving cash where possible by deferring expenditure on anything not absolutely critical right now.

Another one, pubs and especially nightclubs. I'm told (by someone who would know) that it's basically become a lot more competitive especially outside the peak periods. You can still fill a popular venue to capacity on Saturday night, but at any time other than the peak it's become harder to maintain volume especially for "generic" nights (regular DJ's etc not someone touring) that are run every week. There's apparently some nights (especially mid week) at certain venues that are actually cash flow negative now whereas once they were quite profitable, the only reason they're still running them at all is in the hope that competitors (who they believe to also be losing money) pull the pin first. Last man standing type of thing as the market isn't big enough at present to keep everyone profitable. The venues in question are in NSW and SA.

 

[sptrawler]

It's like those people who sell Persian rugs. Their warehouses seem to catch fire alarmingly often (though strangely it never seems to damage the stock).

Never, ever, share a warehouse with one of these guys. At least not unless you also plan on having a "fire sale".

I spoke to the owner of a small manufacturer of electrical equipment last week. I won't be too specific to avoid identifying them (not too many manufacturers of electrical gear in Tassie....) but in short it's stuff that's used mostly in the commercial and industrial market and would be needed for new construction or renovation.

According to the owner, there was a huge slowdown a few months ago which he was assuming was related to the state election. But we've had the election and business hasn't bounced back, not at all it's still right down. He wasn't being political as such, just commenting that he'd assumed that regardless of who was elected, getting it over and done with might be good for business but this hasn't been the case.

Apparently it's not a case of them not winning tenders etc, there just isn't much work to tender for in the first place and they are now quoting on literally every job, no matter how small, they can find. Suffice to say he was very interested in knowing what works we might have coming up that they could tender for and pointed out that, being local, if we needed something in a hurry then they'd be more than happy to do whatever was needed to make it quickly. Apparently they have "just enough work to keep ticking over" but things sure aren't good.

Also had a visit from a salesman (actually the sales manager) from a company based in another state last week. They make some of the same items as the local company I've mentioned. So he's got on a plane, flown to Tas, on the off chance that this might generate a sale or two. Apparently he was flying to Melbourne the next day, then off to NZ.

Another one, supplier of custom built equipment (not electrical). They're offering a 40% discount if we take the one they've already got sitting there rather than building a new one that's very slightly different. Given that the one they've already got would have many potential buyers it seems that they're having real trouble actually selling things.

All of these relate to companies supplying equipment that would be used either for business expansion or to replace existing equipment which has a long lifespan. So it seems that there isn't much expansion going on, and that nobody is really replacing things until it's absolutely worn out and replacement is essential. In other words, businesses are conserving cash where possible by deferring expenditure on anything not absolutely critical right now.

Another one, pubs and especially nightclubs. I'm told (by someone who would know) that it's basically become a lot more competitive especially outside the peak periods. You can still fill a popular venue to capacity on Saturday night, but at any time other than the peak it's become harder to maintain volume especially for "generic" nights (regular DJ's etc not someone touring) that are run every week. There's apparently some nights (especially mid week) at certain venues that are actually cash flow negative now whereas once they were quite profitable, the only reason they're still running them at all is in the hope that competitors (who they believe to also be losing money) pull the pin first. Last man standing type of thing as the market isn't big enough at present to keep everyone profitable. The venues in question are in NSW and SA.

I think the last man standing idea, is alive and well.
Definitely in the car radiator business, local manufacturers are having heaps of trouble competing with Chinese imports. The Chines product is junk, but peopls aren't prepared to pay the extra for the Australian product.
The problem is radiator shops don't want to fit the Chinese product because of warranty problems.
The screws turn tighter and tighter.

 

[Tyler Durden]

I have a friend who delivers groceries to homes for one of the major super markets. He tells me that not only are there people willing to pay a delivery fee, but some even give him tips.

Maybe some aren't doing too badly out there.

 

[sydboy007]

I'm evenly divided. I see a few clothing / fashion shops shutting down, but then the cafes and cheaper restaurants are doing a roaring trade, especially with the great weather we've been having in Sydney.

Admittedly I'm in a reasonably high income area, so it would be interesting to see if things have changed much in the western suburbs where incomes are generally lower. The way the budget has been received and consumer confidence has tanked, not sure if that bodes well for the future or if things will recover quickly as people decide most of the nasties will be watered down to get through the senate.

 

[Wysiwyg]

With automation and 'efficient systems', less human beings are needed to perform repetitive daily tasks. This bodes well for Managers and above because lower life form costs are eliminated which allows them to award themselves big fat set-for-life salaries. On the street are redundant human beings and those near redundancy with less earnings week to week.

 

[CanOz]

With automation and 'efficient systems', less human beings are needed to perform repetitive daily tasks. This bodes well for Managers and above because lower life form costs are eliminated which allows them to award themselves big fat set-for-life salaries. On the street are redundant human beings and those near redundancy with less earnings week to week.

So what should we do, put people back in the mines and take out the machines? Get guys stacking boxes by hand and remove the robots?

You seem to forget that robotics also has made things safer for us too....

Oh, perhaps there is no opportunity left to take advantage of the work care system either...bummer.

Here in China, labor has hit the magic 100 rmb per day mark, mechanization has hit the root crops, finally. Now instead of having to deal with 100 pickers, smetimes not wanting to work at all with the crop burning in the sun or risk of frost at hand, he can get three guys into machines and harvest his crop....bummer

 

[Wysiwyg]

So what should we do, put people back in the mines and take out the machines? Get guys stacking boxes by hand and remove the robots?

You seem to forget that robotics also has made things safer for us too....

Yes you're absolutely right. The migration from manual work to touch screen is happening now though I can't see where the majority of manual workers, those with more brawn than brains are going to fit in.

 

[Julia]

I have a friend who delivers groceries to homes for one of the major super markets. He tells me that not only are there people willing to pay a delivery fee, but some even give him tips.

Maybe some aren't doing too badly out there.

What most are not seeming to recognise is individual initiative and effort.
I have a window cleaner, significantly disabled because his mother took thalidomide during the pregnancy and as a result he has one arm which is a stump at the elbow and the other with a full hand but only about four inches long below the elbow.

It has not stopped him being self sufficient all his adult life. He runs a highly regarded cleaning business, where no corners are cut and a perfect result is assured. To watch him washing the interior roof of my patio, on a stepladder, is a very humbling experience. He also never considers that his disability puts him at any sort of disadvantage. Hence his success.

 

[Ken Oath]

What has stood out to me throughout this thread is the internet. Supposedly we are in transition into the information age. The shops that have to compete with goods that can be accessed on the internet are in decline. I see that in my home town with many shops that have been operating as long as I can remember disappearing leaving a slow and depressed mall area. Although, Food & service products continue to do quite well.

It is a huge task for all of us to adapt, adjust & innovate.

Another point is that Australia came through the GFC almost unscathed compared to the countries in the Northern Hemisphere. Was that good Governance or because our Asian neighbours were discovering capitalism and booming?

Speaking of Government, there seems to be a lot of angry people regarding the recent budget. Maybe the Government has already seen what we are discussing here and decided we cannot carry large levels of debt into the future.

 

[sydboy007]

Speaking of Government, there seems to be a lot of angry people regarding the recent budget. Maybe the Government has already seen what we are discussing here and decided we cannot carry large levels of debt into the future.

if that was true we'd be heading back to the system before deregulation with limits on credit growth. $1.8T in private debt and counting. It never rates a mention, yet I feel it's now at a level that makes the economy extremely fragile. The Govt talks about $1B a month in interest payments for the public debt, yet never mentions the over $100B in private interest - ~50% of which leaves the country - and the fact that we've sold off so much of the ASX to foreigners as well so much of the economic profit of our major companies also heads off overseas.

 

[pixel]

we've sold off so much of the ASX to foreigners as well so much of the economic profit of our major companies also heads off overseas.

... and how much economic profit would there be without foreign investment?
... and how much economic profit do Australian companies import from Overseas operations?

 

[sydboy007]

... and how much economic profit would there be without foreign investment?
... and how much economic profit do Australian companies import from Overseas operations?

I'm not complaining about borrowings that are self liquidating, but we borrow far too much for consumption, especially our over consumption of housing.

No idea how much income we receive from our overseas investments, but I'd feel confident to bet that we still have a net deficit.

 

[Smurf1976]

I'm not complaining about borrowings that are self liquidating, but we borrow far too much for consumption, especially our over consumption of housing.

If you look at it from a national perspective, then what we did is borrow a huge amount of money from overseas in order to end up with mostly the same houses we already had. We took on a heap of debt in return for essentially nothing of value.

To suggest that private debt somehow doesn't matter whilst public debt does, is to suggest that government is most or all of the economy which in Australia it clearly isn't. Private debt will matter an awful lot when interest rates rise or some other major shock occurs - it will happen someday.

 

[Faramir]

Has anyone tried booking accommodation very recently? It seems much more easier to book a room than last year. I was asked to stay an extra night in Kiama last weekend. I went to the counter expecting "sorry, all rooms have been booked out" but instead they told me that they had heaps of rooms. Normally this motel is very crowded but last weekend it was not the case. I was my first weekend work trip being away for a while. I am definitely holding back on travelling. I wish I could avoid it altogether.

 

[Smurf1976]

I am definitely holding back on travelling. I wish I could avoid it altogether.

Is that purely as a means of saving money? Or for some other reason (eg concerns about airline safety, environmental reasons etc?)

 

[sydboy007]

If you look at it from a national perspective, then what we did is borrow a huge amount of money from overseas in order to end up with mostly the same houses we already had. We took on a heap of debt in return for essentially nothing of value.

To suggest that private debt somehow doesn't matter whilst public debt does, is to suggest that government is most or all of the economy which in Australia it clearly isn't. Private debt will matter an awful lot when interest rates rise or some other major shock occurs - it will happen someday.

Very true. Considering over 90% of property "investors" tend to buy pre existing dwellings, and negatively gear those properties, it's a massive drain on the budget and massive drain on the economy. Shelter is now worth over $5T, yet it's basically false wealth.

I often think one of the way reasons our productivity is so crap these days is because the value of the land for business is so high. A country the size of Australia and we've somehow woven ourselves up in zoning laws and restrictive development processes that it costs too much to build practically anything.

 

[sydboy007]

Has anyone tried booking accommodation very recently? It seems much more easier to book a room than last year. I was asked to stay an extra night in Kiama last weekend. I went to the counter expecting "sorry, all rooms have been booked out" but instead they told me that they had heaps of rooms. Normally this motel is very crowded but last weekend it was not the case. I was my first weekend work trip being away for a while. I am definitely holding back on travelling. I wish I could avoid it altogether.

My parents handle a few small beachside holiday rental properties for their owners and they still seem to be getting pretty good levels of bookings. My mum was complaining the unusually warm weather was making it busier than usual.

 

[Faramir]

Is that purely as a means of saving money? Or for some other reason (eg concerns about airline safety, environmental reasons etc?)

Just want to save money.