There’s so much going on in the business, economics and property spaces right now. Here are the stories that caught my eye this month:
Retail spending finally falls
Australia's AAA rating confirmed
Demand rises for CBD office space
Industry index declines
Read more below.
The Reserve Bank is driving up interest rates to reduce consumer spending and bring down inflation, and it appears their efforts are finally yielding results.
According to the latest data from the Australian Bureau of Statistics, national retail sales fell 3.9% in December – after 11 consecutive monthly increases.
Sales also declined in every state:
Victoria -4.7%
Western Australia -4.7%
Queensland -3.8%
Tasmania -3.7%
Australian Capital Territory -3.5%
New South Wales -3.4%
South Australia -2.5%
Northern Territory -2.4%
ABS spokesperson Ben Dorber said the December decline “suggests that retail spending is slowing due to high cost-of-living pressures”. “Retail businesses reported that many consumers had responded to these pressures by doing more Christmas shopping in November to take advantage of heavy promotional activity and discounting as part of the Black Friday sales event,” he said. Nevertheless, Mr Dorber also noted that retail turnover remains “elevated” and increased 7.5% during 2022, so this decline is starting from a high base.
Australia has had its AAA credit rating affirmed by one of the world’s big three credit ratings agencies, S&P. In a report announcing the decision, S&P highlighted “Australia's strong institutions, which are conducive to swift and decisive policy making, credible monetary policy, and a floating exchange-rate regime”. S&P also forecast that while the economy would slow, Australia would avoid a recession, and cope with higher inflation and interest rates. “Australia's historically low unemployment rate of about 3.5% in December 2022 means higher costs and mortgage payments can be absorbed by households, in our view,” it said. “We expect the slowing economy to add roughly 1 percentage point to unemployment over the next two years, meaning unemployment will still be low in a historical context.” S&P also praised Australia's banking system, which it said was in the “top quartile” of systems and was “supported by conservative and largely effective regulation”. The other two major ratings agencies are Moody’s and Fitch. Want to expand? Call me for a loan
Demand for office space increased by an average 0.1% across the country's CBDs during the six months to January, according to the latest six-monthly snapshot from the Property Council of Australia. Nevertheless, the CBD vacancy rate actually increased from 12.0% to 12.5%. That was due to considerable office construction activity, with the supply of new office space exceeding the historical average in five of the six most recent half-yearly reports. Property Council chief executive Mike Zorbas said he was encouraged by the latest data. “This is the third six-month period of positive demand nationally for office space in our CBDs,” he said. “Organisations see that an office presence in our cities is an essential part of doing business. While new supply has increased total vacant space in some areas, these latest numbers are a vote of confidence in our CBDs.” I can help you get a commercial loan
Australia's leading employer association has warned the Reserve Bank not to go too far with raising interest rates, as its latest survey of businesses reported gloomy results. Ai Group's Australian Industry Index, which covers manufacturing, construction, utilities, transport, ICT and technical services, fell between December and January, from -1.1 to -11.6 points. A score above 0 indicates expansion; below indicates contraction. January was the ninth month of contraction since May 2022, when the Reserve Bank started increasing the cash rate.
“As the economy slows in response to the policy focus on reducing inflation, there are signs of weakening demand in the industrial sector with sales and new orders falling and employment growth easing,” Ai Group chief executive Innes Willox said. “Energy-intensive manufacturers and business service providers are reporting the steepest declines in activity to date. “With the Reserve Bank deciding to raise the cash rate further, the decline in industrial sector activity underlines the risks of an excessive tightening of policy over coming months.”
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