By Richard Webb
AUSTRALIANS are paying off debt rather than spending. We are buying items only when they are on sale - and even then only when they are showing a larger-than-usual discount.
We are converting our credit card reward points into gift vouchers or financial credits.
And even when it comes to food, we are shifting to house-brand items rather than the usual heavily advertised branded former favourites.
Pity the poor retailer, particularly the smaller one with less profit margin to fight on price.
It seems we've turned into a nation of cautious and canny shoppers, according to Australian National Retailers Association chief executive Margy Osmond. And she's not sure there's any sign we will change our ways.
''The average annual growth rate for retail sales is about 6 per cent. Over the past 12 months it has been 1.2 per cent, 1.3 per cent. It's been genuinely grim for retailers, extremely patchy,'' she says. ''There's been a flight to value and I'm not sure there will be a flight back from it.''
Consumers need to be enticed to spend, indicating the sale prices we've seen since before Christmas can be expected to continue. That's good news for everyone but retailers.
The Reserve Bank is applauding our behaviour as we prepare to get washed in a flood of resources-related money from overseas following the huge lift in coal and iron ore contract prices. The Reserve has directed we spend a little less and save a little more, and that's what we have been doing - to date.
Should we suddenly change our minds and go on a spending binge, the bank will lift interest rates in no time to try to curb our enthusiasm.
And that's the rub because now, with employment strong - 45,900 new jobs in July, holding the unemployment rate at a 17-month low of 5.1 per cent despite a 45,000 increase in the working population - and consumer confidence booming, we seem to have a recipe for a jump in consumer spending. Yet, despite the temptation, we've kept our powder dry.
Mrs Osmond says in the past, retail sales went hand in hand with consumer confidence; they mirrored each other. ''In the past 18 months to two years, consumer confidence and retail sales separated,'' she says.
St George Bank chief economist Justin Smirk says murkiness on the retail radar may explain the current conundrum. He says it was the $11 billion or so in federal government handouts last year that kept the retail sector out of recession, and now this stimulus has gone it's no surprise retail sales haven't continued to climb.
''Last year, retailers were held up by the stimulus. Now it's fallen back to the underlying rate, but once we are through this patch we will start to see a recovery in consumer spending.''
Deutsche Bank senior economist Phil O'Donaghoe agrees. ''We are looking for a pick-up in consumer spending in the next six months,'' he says. ''It's a retail sector in perhaps the most resilient advanced economy in the world so it's hard to get too pessimistic about it.''
Upshot: If the economists are right, ignore whingeing from the retailers when they release their sales figures in coming weeks. It's going to get better, but also prepare for higher interest rates.