Home' The Channel Magazine : National Newsagent July 2012 Contents 10 National Newsagent July 2012
IS THE GLOOM STARTING TO
Australia's retail sector has been
struggling since the post-GFC cash
handouts faded---the hit to consumer
confidence, fears of job losses and a
general need to cut back on consumer
debt have all cut into the appetite of
Australians for a trip to the shops.
However, a string of recent developments
suggest that the gloom permeating
shopping malls may be starting to lift.
In the front line here are interest rate
reductions, and it seems that the rate
cuts made late last year have played a
role in lifting spending in the early part
of 2012. Retail sales shifted up in the
March quarter by 1.8 per cent in inflation-
adjusted terms. Annual retail sales
growth is now at its strongest since the
end of 2009.
RETAIL SPENDING TO GROW
Interest rate cuts and Federal
Government handouts will help retail
spending grow at its fastest pace since
the 2008-2009 global financial crisis, an
independent forecaster says.
Deloitte Access Economics is
forecasting real, or inflation adjusted,
retail sales to grow by three per cent in
2012/13, up from an expected two per
cent in 2011/12, and after 0.7 per cent in
Interest cuts by the Reserve Bank
of Australia (RBA) in November and
December last year helped to lift spending
in the early part of 2012, and the central
bank has since cut the official cash rate
by a further 75 basis points.
"Markets have been betting on more
rate cuts through the remainder of 2012,"
Deloitte Access Economics director David
Rumbens said in the forecaster's quarterly
"Those cuts will free up a substantial
chunk of disposable income."
The May 2012/13 federal budget also
included a number of measures to boost
the economy, notably payments for
school-age children and extra welfare
"But risks continue to remain high,
particularly in relation to the global
economy," Rumbens said.
"Many households may take the
opportunity to run down debt faster rather
than spend the extra money in their
CONSUMER CONFIDENCE UP
Consumer optimism has grown only
slightly, despite another official interest
rate cut, a private study shows.
The latest Westpac/Melbourne Institute
Consumer Sentiment Index rose by only
0.3 per cent to 95.6 index points in June.
Westpac chief economist Bill Evans
said the result was disappointing,
considering another move by the Reserve
Bank of Australia (RBA) to drop the cash
rate 25 basis points at its June meeting.
"Sentiment has risen only 1.1 per cent
from its April level and remains 1.7 per
cent below the level recorded in October
last year," he said.
"This is despite an (overall) 125 basis
point reduction in the cash rate that has
brought the average standard variable
mortgage rate down by nearly one per
Evans said people clearly were
preoccupied with other factors, including
the condition of the domestic economy
and economic instability offshore.
Evans said a new element of the study
showed how domestic and international
economic factors were affecting people's
The June survey included additional
questions on news categories
(participants) recalled and whether
news was assessed to be favourable or
unfavourable," he said.
"The results show negative news
around the economy and international
"By far the highest recall was on news
about economic conditions (67.1 per
cent of respondents) and international
conditions (40.4 per cent).
"The recall level on economic news was
the highest since 2009 and roughly double
that of news items on interest rates (31.8
per cent) and budget and taxation (34.7
Two of the study's five sub-sectors
showed improvement, with respondents
feeling better about their family finances
compared to a year ago and more
confident in buying a major household
However, forward projections for family
finances and the economic outlook in the
next 12 months were both weak, as were
economic projections for the next five
FAIRFAX PROFIT DECLINE
The decline in Fairfax Media's annual
profits has accelerated, the company
signalled to the market in June.
In an update released to the Australian
Stock Exchange, Fairfax Media said that
its full year profits would be around $500
million, down nearly 18 per cent on last
year's $607.4 million, which were in turn
down five per cent on the previous year.
The company said that so far in 2012,
revenues have sunk by eight per cent
compared to the same time last year.
Referring to the "difficult" environment,
CEO Greg Hywood said in a statement:
"This trading environment has continued
and the company expects revenue for the
second half to be approximately eight per
cent below last year.
"Assuming current trading conditions
remain, the company expects to report
underlying earnings before interest, tax,
depreciation and amortisation (EBITDA) of
circa $500 million."
In June, Fairfax was trading at a near
historic low of 59c a share, valuing the
company at $1.4 billion. The company said
that it will have a net debt at the end of
the year of just below $1.1 billion.
HERALD SUN STEPS INTO
The Herald Sun's new digital pass is its
first step into paid content. It will also be
a test for other publications in the News
stable and other traditional media globally
who are attempting to monetise the digital
tidal wave that is upon us. But will it
So far in Australia, The Australian and
AFR are charging for their content. The
Australian currently has 40,000 digital
subscribers, 10,000 of which had an
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