Urbis Think Tank
Reserve Bank Governor predicts a light at the end of the tunnel for retailers
In a speech today, Glenn Stephens, the Governor of the Reserve Bank gave an explanation for the ‘cautious consumer’ and predicted that consumption would begin to rise. While he stopped short of predicting when that 
would happen, he did suggest it would be sooner rather than later.
The chart he presented (right) demonstrated that “the trend growth for real per capita household income over the period 1995 to 2005 was 2.0 per cent per annum.”
Importantly, he then went on to say “That’s a pretty respectable rate of growth for an advanced country. It was more than double the growth rate seen in the preceding two decades from 1975 to 1995.”
The other important line on the chart is Consumption. This line was catching up to income throuhg the 90s and 00s, and that was unsustainable. But, from 2007, consumption started to slow down. The Governor’s point is that this slow down is also unsustainable.
Current forecaststs from Urbis Property Economics are for the correction to take place some time between Chistmas 2011 and 2013. Like the Reserve Bank, we can’t predict the exact turnaround point. However, it’s clear that better times for retailers are ahead, at some point.
Finally, one last caution from the Governor is in order. Although consumption growth will rise from the current levels, he doesn’t believe that they will return to the heady days we left in 2005.