Leadership and Consumer Preconditioning?

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The importance of leadership should not be underestimated in times of financial uncertainty.  In fact, it is equally as important now as it was during the period of the Floods and Cyclones.  Unfortunately two of Australia’s resource state’s have been struck by a period of intense gloominess that is very slowly eroding away their economies.  Both WA and QLD have done the sporting equivalent of dropping their heads and resigning themselves to a position of disillusionment.

With this lack of self belief and poor consumer confidence has come the preconditioning that if something is not on sale, incentivised or the like, then it is not worth purchasing…at least not until the sale or offer recurs.  The problem with this pricing strategy is that the consumer is starting to recognise the “special” price as the actual price with the retail price as the over inflated price.  It is this disconnect between the vendor and purchaser that is literally getting out of control.

The reality is that from a psychological perspective, the industry is telling the consumer that all is not well.  If the purchaser is constantly having to be bribed into making a commitment, then perhaps the pricing mechanism is wrong.  The public need to again feel that a sale is a genuine sale and not a weekly event.

So why is leadership important in this scenario?  Leadership is important in instilling confidence in the public.  As our PM is currently learning, a significant part of leadership is integrity and having people believe what you are saying.  This applies to our State politicians equally.  If the message is not believable, then the public will react by sitting on their hands.

It is somewhere around there that the message gets muddied and the public switch off.  How can it be that the Nation’s unemployment rate is 4.9% with Queensland’s at 5.2% that consumer confidence is so low?  Now bearing in mind that full unemployment is considered to be 5.0%, there should be a general feeling of optimism.  We are at unemployment levels that prior to 2005 had not been seen since 1980 or thereabouts.  Do the public not believe the statistics or is it irrelevant if they are constantly told that their cost of living is spiralling out of control?  The message needs to change or provide a solution, preferably both.

So whilst the media would have us believe that retailing has fallen off the cliff, collectively retail is still growing in Queensland, albeit modestly.  This is an excellent result given that industries such as tourism which attract high spending individuals have softened dramatically over the past two years.  The fact Australia has participated in the GFC, despite what various politicians might suggest needs to be acknowledged and put to bed.  Australians are saving at rates that suggest an enormous fear that the economy of the world will collapse.  Whilst no one should begrudge a healthy saving ethic, it is the reasons behind this saving strategy that the author would question.

Some of this fear may have arisen as a result of house prices having softened, both in real terms and actual prices.  Quite simply the same house today is unlikely to be worth the same as it was at the peak of the cycle in late 2007 and early 2008.  That is the reality of the market which is a positive if you are a glass half full individual because wages have continued to grow and the interest rate cycle appears to have reached or neared its top.  Those people that bought through 2008 to the present whilst they may have experienced a slight loss in value, the financial institutions had tightened their lending criteria sufficiently to ensure that positions of negative equity were minimalised.

With the changes to the market, it is very easy to argue that now is probably one of the better times to be buying real estate.  If you are cashed up and don’t have to sell, there are very good buying opportunities to be had.  If you do have to sell, you are buying and selling in the same market, a market that is offering more bang for your buck than three to four years ago.  The value proposition now is excellent.

The banks continue to assure the public they are open for business, albeit under stricter lending criteria.  Westpac suggests rates are on their way down.  Unemployment is low and more jobs are being added monthly to the workforce.  Retailing is robust in broad terms.  The resource boom is real, just take a trip to Gladstone, Western and Central Queensland, Karratha and northern South Australia.

It seems to the author the one thing we are lacking at present is leadership.  Leadership in politics and industry, strategies that don’t panic the buyer into believing that things are worse than what they are and some good old fashioned pride in where we live.  It wasn’t that long ago that Queenslander’s consider themselves to be living in “Gods’ State”.  Having been to China recently, I still believe we do…how about the rest of you?