Historic Bank on Corner

There is reporting that the Retail Industry is not pleased by the interest rate raise to 3.25 percent from 3 percent which happened October 6^th at the Reserve Bank of Australia meeting. In the newsletter Inside Retailing Russell Zimmerman stated that he thought the rate hike was too soon and could impact Holiday sales for retailers.

Retail Industry gives feedback

“Usually changes to interest rate take between three to six months to impact the retail market. So, the damage could hit retailers just in time for Christmas.” – Russell Zimmerman ARA Executive Director

Well it is mid October and Christmas is less than 3 months away so it does seem unlikely that this will have a major impact on holiday spending.

Is Mr. Zimmerman serious in his appraisal that this is truly bad news, being a mouthpiece for members of the ARA, or is this an attempt to quell future rate increases that may come in November and / or December?

Rate hike not unexpected

But this rate hike does not seem to be unexpected but just maybe a bit earlier than hoped.

Previously JP Morgan chief economist Stephen Walters had said that the RBA would raise rates at this meeting on strong retail numbers previously.

National Australia Bank chief economist Robert Henderson had said:

“A November rate hike would likely be followed by another in December, leaving rates 50 basis points higher by the end of 2009.”

Other Industries than Retail Respond

Not only was the raise from 3% to 3.25% stated to be unwelcome by many in the retail sector but also from the car industry that sees the recovery as starting but not fully developed.

The Federal Chamber of Automotive Industries said the increase in the interest rate was premature.

“Economic stimulus has resulted in positive business sales but private buyers need the confidence to return to showrooms in larger numbers,” said chamber chief executive officer Andrew McKellar.

The chamber gave a sales figure that fell 3.5 per cent in September as a reason for the beliefs.

Future Actions by the RBA

The RBA is scheduled to have meetings in November and December. It is entirely possible that there will be another adjustment at either or even both of these meetings. But again maybe the RBA was hoping to slow the overcooking home price market now and bring some stability in price adjustments to the markets during the run-up to the holiday season by limiting changes then. Or it may be looking to reduce the amount of time that the end of some of the small business stimulus package overlaps with 49 year low interest rates.

Affect on Retail Businesses

Some in the retail field have stated that the interest rate change has a huge affect on consumer spending and quite directly. But while variable rate mortgages are common, Oceanic consumers will not necesarily retreat from spending on an expected quarter point increase from a 49 year low.

Most government inputs are a bit slow, indirect, and even uncontrollable.

An interest rate hike is one of these.

Myer CEO Bernie Brookes has said at a Press Conference that this rate rise would probably NOT have “any impact on our sales growth line”

A Source of Pride?

“Australia’s performance in the middle of this global recession has been the best of all advanced countries and one of the reasons for that has been the stability in our financial system.” – Treasurer Wayne Swan

And this adjustment is no different.

It is a small adjustment, might help some markets like housing prices from overheating, and has already made the Australian Dollar stronger in world markets.

A strong Australian Dollar has many good, and some bad effects on the Australian economy possibly beyond what a quarter percent interest rate increase has.

Related posts:

1. Reserve Bank of Australia lowers interest rate ¼ Percent

Australian Business Rebounds

Business confidence rose in August, to six year high in the latest positive news for the Australian economy. Last month we had an article about consumer sentiment reaching a 35 year high, this month there is good news in the business sector.

The National Australia Bank’s monthly business survey showed business confidence at the highest level since October of 2003, as the retail, finance, manufacturing and personal services sectors rose.

The index rose 8 points in August to 18 index points.

“It is worth noting firstly that the August survey came out of the field on Friday 28 August,” said NAB chief economist Alan Oster. This was before the announcement of the better-than-expected second-quarter GDP gain of 0.6 per cent.

“As such the further significant improvement in business confidence is quite remarkable,” Mr Oster said.

“Confidence levels are now considerably above long term average levels and indeed are at the highest level since October 2003. Nothing that happened last week would, in our view, have lessened those readings – indeed it may well have added to confidence levels.”

Confidence levels were consistently strong across most industries, NAB said.

The positive news comes after the ANZ Bank job ads survey for August, released yesterday, showed the first positive result in over a year.

Within NAB’s business confidence survey, trading rose 8 index points to 12 in August, while profitability skyrocketed to 11 points in August from 1 in July.

“While these outcomes are very encouraging, to some extent we suspect that current confidence levels may be starting to get to unrealistic levels – just as they fell to overly pessimistic levels earlier in the year,” said Mr Oster.

“Certainly the gap between confidence and actual business outcomes – and indeed business intentions for capital expenditure – points in that direction.”

Some Weakness evident

Not all metrics within the NAB survey rose, with forward orders slumping 7 index points to minus 2 in August.

“The survey clearly points to continuing strong growth in demand in the third quarter,” Mr Oster while the result is encouraging, activity levels are yet to catch up with the big spike in confidence.

“It does, however, suggest that business continues to draw on inventories to help satisfy increased demand.”

“Businesses are feeling happier, they’re getting better forward orders, etc. but they’re not cranking up the factories to produce more” Mr Oster said.

“They’re tending to run down their inventory levels and they’re tending to import.”

“So some of that demand is going to leak away, but at the end of the day we’re still an economy that’s probably still growing, which is pretty good,” he said.

Creative Computing’s mission is to design, develop, and implement systems that allow retail business owners to operate and manage the business in a holistic fashion, meeting personal and corporate objectives.

Creative Computing’s philosophy is to continually enhance the CONTROL system through communication with users and staying in touch with current retail trends, keeping CONTROL at the cutting edge of retail system functionality.

Backing up our software and your investment are our friendly support staff that will provide all the assistance required, both during the initial implementation and in the many years to come.

For more information, go to our web site: www.creativecomputing.com.au

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1. Australian Consumer Sentiment shows highest increase in 35 years

Consumer Sentiment All Time High in Australia

Latest data suggests that consumers are feeling more optimistic about the state of the economy and in numbers never measured before.
The Westpac-Melbourne Institute has been tracking a metric called the consumer sentiment index.

The index is up 27.8 in the last 3 months which is the biggest three-month gain since the survey was started in 1975.

“The message is clear – as far as consumers are concerned, the worst of the current downturn appears to have passed,” said Westpac senior economist Matthew Hassan on Wednesday August 12th.

The last time that similarly large gains were observed was coming out of recessions in the 1980s and 1990s with gains of 22.8 and 20.3 percent respectively.

Additionally other indices showed increased belief in a recovery. The June quarter house prices rose 4.2 percent. And the jobless rate seems to have leveled off at 5.8 percent with some signs of increased hiring.

Some other metrics and their improvements:
•    12 per cent jump in share prices
•    1.2 per cent fall in petrol prices
•    4 US cent jump in the Australian dollar
•    Consumers’ economic outlook 11.2 per cent increase
•    ‘Good time to buy a major household item’ rose 2.2 per cent
•    ‘Time to buy a dwelling’ rose 1.6 per cent
•    ‘Time to buy a car’ also rose 3.1 per cent

“The continued rally in consumer confidence in August underscores the resilience of consumer demand,” Mr Hassan said.

For retailers this means that the worst may be over and that those posed to fulfil this increase in retailing purchase are likely to gain the most. And metrics are even showing that consumers are more interested in buying large items, cars and even homes.

Creative Computing’s mission is to design, develop, and implement systems that allow retail business owners to operate and manage the business in a holistic fashion, meeting personal and corporate objectives.

Creative Computing’s philosophy is to continually enhance the CONTROL system through communication with users and staying in touch with current retail trends, keeping CONTROL at the cutting edge of retail system functionality.

Backing up our software and your investment are our friendly support staff that will provide all the assistance required, both during the initial implementation and in the many years to come.

For more information, go to our web site: www.creativecomputing.com.au

Related posts:

1. Australian Business Confidence rises to a 6 Year High

Australia May 2009 Retail Sales Good

The figures for May 2009 Retail Sales have just been calculated by the Australian Bureau of Statistics (ABS) and they seem to be good news. For most industries and in most regions of Australia year on year sales for the month of May 2009 have risen and quite substantially.

Most regions rose
The news was pretty much the same for most of Australia: More Sales Volume. There was only one region that had a decline and that was a small 0.1% decline in Tasmania. New South Wales and the Northern Territories were flat for retail growth. The remainder of Australia saw growth in retail sales and at about twice the amount expected by the AAP.  4 Areas had over a 1% growth in sales and those regions were:  Queensland (+1.5%), SA (+1.8%), WA (+3.5%) and the ACT (+1.8%).

Most Industries Increased
According to the new report all industries had an increase in seasonally adjusted terms in May 2009 except for the Household Good sector which contracted 2%. Everything else increased and often by a large amount. Some of the leaders were Department stores with a 5.5% increase and Clothing and soft good retailing with a 2.9% increase.

Two Big Chains see Good Indicators
In this last month, two of the big chain stores are seeing strong sales. David Jones CEO Mark McInnes states that he is seeing a return of consumer confidence. Just this past Sunday McInnes stated that the Australian Government Stimulus and the return of more normal equities trading prompted a figurative sigh of relief in the markets. Another large chain chairman, Gerry Harvey, of Harvey Norman stated that they saw increases of at least 25% in the sales of notebook computers, plasma and LCD televisions in June.

People have feared doom and gloom and that is far from the case. The news is not bad and in fact is quite good in the retail sector and that is usually a good barometer for the economy as a whole. Some areas and sectors are clearly showing very strong growth.

Creative Computing’s mission is to design, develop, and implement systems that allow retail business owners to operate and manage the business in a holistic fashion, meeting personal and corporate objectives.

Creative Computing’s philosophy is to continually enhance the CONTROL system through communication with users and staying in touch with current retail trends, keeping CONTROL at the cutting edge of retail system functionality.

Backing up our software and your investment are our friendly support staff that will provide all the assistance required, both during the initial implementation and in the many years to come.

For more information, go to our web site: www.creativecomputing.com.au

Related posts:

1. Is the Retail Industry overreacting to the Interest Rate Hike?

Tax Allowance Large Biz - Australia

The earlier information from the Australian government, our company, and others was that this would be a 30% Business Tax Allowance Deduction on depreciable physical items over $1,000 AU. If a company has over $2 million in turnover yearly, the passed bill could make them eligible for  tax deductions of 30% beyond their normal allowed deductions.

Larger Businesses – (Over $2 million turnover) – Timeframe is Urgent – 1 month!
The bill has passed and that is good news for companies that have made any eligible purchases since December 13th of 2008, but if you were waiting for the bill to pass before committing to additional purchases, and your business is classified as large, then the time to commit is approaching very quickly! This is why we rushed this article out and are sending the newsletter as soon as possible. If your company’s gross sales or turnover is over $2million it would be very beneficial to be able to make a commitment before June 30th of 2009. After this date the deduction increase goes down to 10% of the purchase price.

For Small Business – (less than $2 million turnover) – 50% Tax Deduction!

Tax Allowance - Small Biz - Australia

But the good news for small businesses (less than $2m turnover) is that the percentage rate of the purchases that are deductible has been raised to 50%. We are happy to announce that Point of Sales servers, terminals, scanners, and peripherals seem to be eligible when installed as new systems and upgrades. Apparently the legislators wished to reward small businesses more.

For Small Business – Extended Deadline from June to December

For businesses classified small there is additional good news in that the deadline for eligible purchases has been extended until December 31st of 2009. This seems like a reasonable decision as honestly, with us being a hardware, software, and service provider we were a bit concerned about the time from the voting on the bill, to the initially proposed cutoff date, customers would only have about a month and a half to make a purchase. We were not sure what amount of time pressure there might be to start consultations about the best retail system, the hardware and software needed and to get a quote to customers that would allow them to make a decision. But the second part of the good news is that smaller businesses have until December of this year to make a decision.

Recommendation: We recommend calling us or emailing us as soon as possible to get more information about our retail business systems and what they can do for your business. Please let us know that you are interested in the Tax Allowance for your purchases and we will work to explain the legislation and design a system for you as soon as possible.

Our core product CONTROL is an integrated and scalable Retail Management System for retail stores, wholesale, franchise and manufacturing businesses. It provides a unique blend of premade modules, custom integration and tuning to give businesses the great results, more reliably, faster, and more cost effectively than completely custom solutions.

To find out how we can help you run your business please tell us about your business or visit us at our homepage.

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1. What the Proposed Business Tax Allowance means to retailers

Plastic Bag Ban and your Retail Business

In one of the more interesting retail stories recently, the Government of Southern Australia and the large discount chain Target will not give customers free bags to carry purchases home in. This is recent trend where more consideration is given to the ecological impact of plastic bags as people try to limit the use of one-use disposable bags. But it is causing an impact on retail businesses and retail staff and that is what we wish to discuss in this article.

Southern Australia was scheduled to ban free plastic bags for retail customers. The ban will forbid free plastic bags to customers and started on Monday May 4th. It is expected to cause some adjustment, confusion, and possibly even anger directed at retail staff. Union representatives for retail staff are asking for consideration of staff members when this happens. “Our strong message to customers is, don’t bag innocent shop assistants because you can’t get a free plastic bag from Monday, May 4,” says Shop, Distributive and Allied Employees Association secretary Peter Malinauskas.

He adds: “It’s a government decision. Shop assistants are merely obeying the law and doing their job.”

Additionally the large retailer Target is posed to do an Australia wide ban in June of 2009. Jon Dee from environmental group Do Something reflects on the recent changes:

“If you take this initiative by Target and combine its results with the plastic bag reduction that is going to take place with next week’s ban on plastic bags in South Australia, then Australia will be using half a billion less plastic bags every single year,”

He added: “And it’s because of that I think we’ve finally reached that tipping point where a national ban on plastic bags is now inevitable.”

So whether you approve of this measure or don’t, it appears that this may be a change in retail. In Southern Australia it will have started on Monday May 4th and it will soon be happening in Target stores nationwide. And if your company decides to take this approach voluntarily or is forced by government regulation it will have an impact at the sales counter in staff and customer confusion, and possibly even anger at the staff.

How to deal with this change and plan for possible problems at the retail level should be considered by retail management. More management interaction when the changes take place is definitely a consideration. In SA the union had representatives in stores trying to explain the changes and diffuse anger aimed at sales staff. Store management, signage, and staff should be trying to explain the situation as clearly and honestly as possible. If it is a store or management decision there may be quite different ecological concerns by lower management, sales staff, and some of the customers. These differences may not have been visible until the voluntary or governmental ban on free plastic bags. A discussion about ecology has traditionally been kept away from the cash register of most businesses, and for good reason. Anything that confuses and angers customers at the key purchase point in a shopping experience should be avoided or minimised. The change should be considered and planned for if and when it happens to your retail business.

Creative Computing’s mission is to design, develop, and implement systems that allow retail business owners to operate and manage the business in a holistic fashion, meeting personal and corporate objectives.

Creative Computing’s philosophy is to continually enhance the CONTROL system through communication with users and staying in touch with current retail trends, keeping CONTROL at the cutting edge of retail system functionality.

Backing up our software and your investment are our friendly support staff that will provide all the assistance required, both during the initial implementation and in the many years to come.

For more information, go to our web site: www.creativecomputing.com.au

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Reserve Bank of Australia Lowers Interest Rate .25%

The Reserve Bank of Australia Tuesday lowered interest rates a further one quarter of a percentage point to a 49-year low. The reason that was given is that the economy is contracting, but at a slower pace than other major economies. Because the current condition is fairly good in Australia it seems a deeper cut was not warranted.

Governor Glenn Stevens said in his statement the Reserve Bank of Australia will proceed cautiously in coming months, making small adjustments to interest rates only if needed.

“The Australian economy is contracting, though by less than those of its trading partners,” said Governor Glenn Stevens in a statement.

RBA Governor Glenn Stevens

“There are tentative signs of stabilization in several countries, including China, though it is too early yet to judge how durable these will prove to be,” he said.

“The stance of monetary policy, together with the substantial fiscal initiatives, will provide significant support to domestic demand over the period ahead,” he said.

The Australian dollar raised after the statement and bond prices fell as speculators ventured that the RBA could be close to the end of its easing cycle. The Australian dollar was quoted recently at US$0.729, up from US$0.7090.

The RBA cut interest rates by 400 basis points between September 2008 and February 2009 as it grappled with the rapid plunge in the world economy toward in late 2008.

The decision Tuesday is “a real compromise” for the central bank, said Katie Dean, senior economist at Australia and New Zealand Banking Group. “Further cuts will be drip-fed from here if indeed they come,” Dean said.

“The RBA has more work to do,” said UBS Chief Economist Scott Haslem.

“We expect the RBA to continue to cut interest rates in similarly-sized steps over the coming six-to-nine months,” he said.< ><-->

Related posts:

1. Is the Retail Industry overreacting to the Interest Rate Hike?

Mike Miles Staples COO

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Woolworth's Store in Australian Mall

In an example of a retail business that is not only surviving but flourishing one does not have to look farther than the local Woolworth’s. Retail giant Woolworths is defying current economic trends, and expects to create 7,000 Australian jobs in the next four months.
The supermarket company posted a 10 per cent increase in first-half net profit to $983 million.
Sales have risen almost 9 per cent over the last quarter to $26 billion.
It has opened 122 new stores in this half-year and completed 190 refurbishments.
Woolworths says it plans to add 15 to 25 new supermarkets each year as well as open more Dan Murphys bottleshops.

Woolworths CEO Michael Luscombe says it is a strong result.

“Woolworths has invested almost $1 billion of capital in this half year to add new stores, improve existing stores, add services, deliver value and create an even better shopping experience for our customers,” he said.
Mr. Luscombe says he believes basic commodities retailers like Woolworths will continue to do well in the year ahead, despite the global downturn.

Michael Luscombe has worked for Woolworth’s for over 30 years and has become CEO last October.

Michael Luscombe - Woolworth's CEO

More at: Michael Luscombe Biography

Michael Luscombe on what is key in Retail:
“Running this business is really all about making us all better shopkeepers…”

What it takes to succeed in retail:
“I’ve always thought we needed to get three things consistently right to be successful: the right products available and well-presented in our stores; a competitive price, and people who enjoyed interacting with customers. That’s still the view I operate with as CEO.”

We at Creative Computing find it encouraging to see a high executive break down an international business operating in challenging times into 3 main aspects that we all should make sure we are doing. And with the results over the last half year it appears it is working.

Creative Computing has systems to help ensure you always have the right products available for your customers. We provide Point of Sale, Inventory Management, Accounting, and General Ledger integrated and accessible from any location.  To find out how we can help you run your business please tell us about your business or visit us at our homepage.

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