Consumer caution is clearly evident in Australia with soft retail sales growth, a return to mid 1980s savings rates and a slowdown in household debt growth. The 20-year booming consumer economy from the mid 1980s is clearly over.
This reflects a combination of factors: renewed awareness post the global financial crisis of the dangers of excessive debt, increased sensitivity to higher interest rates, strong increases in the cost of necessities and rising levels of overseas and online spending.
Look for some relief going forward as household savings rates have now been rebuilt, providing a huge buffer for consumers. However, the mining boom probably means consumers will have to stay cautious, whether they want to or not, to avoid an overheating economy (with higher interest rates providing the ultimate enforcement mechanism). It’s hard to see the growth rate in retail sales going back to pre-crisis levels on a sustained basis.