Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Disclaimer: The Parliamentary Library does not warrant or accept liability for the accuracy or usefulness of the transcripts. These are copied directly from the broadcaster's website.
Slump in sales in June, but house prices surg -

View in ParlViewView other Segments

ELEANOR HALL: Staying with the economy, Australia's retail sales suffered a surprise fall in June.

But it's a different story with house prices which soared in the second quarter of the year,
pointing to a revival in the housing market, and fuelling fears of a new housing bubble.

To make sense of it all I'm joined in the studio by our economics correspondent Stephen Long.

ELEANOR HALL: So Stephen, how big was the fall in retail sales?

STEPHEN LONG: Pretty sizeable Eleanor, down 1.4 per cent in June on seasonally adjusted numbers and
that just shows the volatility that has come into since the Government has been pumping in the
fiscal stimulus because you saw big rises, 1 per cent, in the previous month and the month before
that and down 1.4 per cent in June.

That defied expectations. The Reserve Bank in the minutes of its last board meeting said that it
was expecting to see a continuing rise in retail sales in June and that's what its liaison said and
that's what all the anecdotal material said, that's what we heard Gerry Harvey and various
proprietors saying, and yet we've seen a similar situation where department store sales are down
nearly 9 per cent in the month and clothing sales are down 7.5 per cent, and all categories except
for household goods fell.

But, if you look at the quarter you have a situation where the volume of sales, we're not talking
price here where there was clearly some substantial discounting going on, but the volume of sales
rose by 2 per cent over the three months to June and that is the biggest rise in sales volumes that
we've seen since 2007 before the global financial crisis hit in a big way.

ELEANOR HALL: Now, low interest rates and the first home buyers boost seem to be also pushing the
housing market along.

STEPHEN LONG: Indeed, we've seen established house prices rise by 4.2 per cent in the eight capital
cities in the June quarter; 4.2 per cent in a quarter is a big rise.

Now they've gone down over the year by just under 1.5 per cent, but to have this big rise just
shows the impact of the Government stimulus measures with the first home buyers boost. But more
importantly the lowering of interest rates.

And it will add to those fears that if interest rates stay low we'll see that merely lead to
another round of house price rises that will price out new entrants once incentives for them to
come in come out and lead us back to the merry old dance we were in when house prices surged and so
did debt levels and household debt levels.

ELEANOR HALL: Well, you said that the retail sales went against the Reserve Bank's expectations.
The Reserve Bank met this morning to deliberate on rates, what bearing will the housing and retail
sales be having on where they think rates will go?

STEPHEN LONG: I don't think that this June figure retail sales will make a big difference to their
thinking because we've clearly seen a pretty strong trend over the quarter and there is massive
volatility driven by that influx of Government money with the cash handouts.

But the house prices will affect their thinking. Now, it won't make a difference to the
deliberations this month and everybody expects that rates will be on hold, but the Reserve Bank
Governor recently opined that he was worried about the prospect of house prices rising if interest
rates stayed low and the challenge was that we actually built new dwellings and met demand rather
than simply capitalising the low interest rates in to higher house prices.

Now, that trend I think will affect their thinking and could affect the timing of the next interest
rate rise but that's unlikely to be before the end of the year.

ELEANOR HALL: Now Stephen, so far Australia has managed to avoid a technical recession, what impact
are these numbers likely to have on that?

STEPHEN LONG: Well, the strong volume of retail sales and the rise in house prices will contribute
to gross domestic product and it increases the likelihood that Australia will avoid a technical
recession that we will actually see positive growth in the quarter.

ELEANOR HALL: Now just briefly to the stock market, there's been a flurry of activity there today.
What's going on?

STEPHEN LONG: Yes, indeed. Well, we've seen ANZ buy Asian assets of Royal Bank of Scotland trying
to make itself an Asian bank and we've seen Ten, which has been in a lot of trouble with debt, tap
the market for another $138 million raising more capital. So, there is a lot of activity going on
which suggests both positive and negative outcomes of the GFC.

ELEANOR HALL: Stephen Long, our economics correspondent, thank you.