“Well, maybe one of the Christmas elves is called Anko?”
That’s what you might have to tell the kids, anyway.
Anko is the house brand of Kmart, imprinted on a range of toys that cost as little as a dollar. A lot of such toys are going to end up in Christmas stockings because Australia is set to have a very discount Christmas.
Consumer spending has retreated like an outgoing tide. Australians are closing their wallets as mortgage repayments get higher for more families (remember, even though rates are stable now, many fixed rate mortgages are still tipping over to variable and delivering a huge whack to household cashflow).
The high cost of living and the uncertainty of the outlook have exacerbated a situation where GDP per capita was shrinking for most of the past two years. As 2024 ends, people do not want to spend every last penny on a lavish Christmas.
In fact, the saving rate has risen and we are saving money at the highest rate in two years, while consumption expenditure growth has collapsed, as the next chart shows.
The knick-knacks in the Christmas crackers will be cheap Chinese plastic this year, not shiny silver. The entree will not be lobster. It’s going to be an… efficient Christmas.
A large majority of Australians say they are going to spend less on Christmas this year, according to a survey by research firm DemosAU. The percentage of us planning to do things cheaper than last year is 66%, which is very different to data for 2023, when, according to a survey by the Retailers Association only 30% of households were planning to cut their spending.
DemosAU found five times as many people planned to do their spending at Kmart compared to Myer or JB Hi-Fi.
“These are people across all age demographics — from 18-year-olds all the way up to over 55s,” said DemosAU head of research George Hasanakos.
“The research found it didn’t matter if they were renting or had a mortgage, they are still feeling the pinch.”
Doing Christmas efficiently is smart. Not every year needs to be a gluttonous orgy of consumerism. However, if everyone cuts back spending at the same time, that ripples through our economy.
Many industries are highly seasonal. If you own a Christmas tree farm, a toy store, book store, café by the beach, or even just a pub, you probably rely on the two months of December and January to make money, while the rest of the year you’re lucky to break even.
If you’re unlucky, you don’t make money this Christmas. If you only break even after that, we get a wave of businesses that don’t make it far into 2025.
This is by design, really. One of the ways the Reserve Bank reduces the inflationary pressure in the economy is by encouraging business owners to do the sums and shut down. They sell off their stock, sack their staff and move out of their storefront. That contributes to lower price pressure throughout the economy.
If you think inflation is not yet under control, this is a dose of medicine you may be willing to take. If your view is that inflation will return to an acceptable level anyway, then watching a load of business drop the shutters in January and February is a completely unnecessary sacrifice. Remember that when small businesses go broke the owner loses a lot. Often small business loans have the family home as collateral, and business insolvency after a Christmas of weak spending is a known pattern.
A very discount Christmas, and for some, a grim New Year.
Will you and your family be tightening your belts this Christmas season? Write to us at letters@crikey.com.au. Please include your full name to be considered for publication in Crikey’s Your Say. We reserve the right to edit for length and clarity.
