More retail grieving as the savers dig in

It's a widely held view that households have been saving aggressively as they bring their income and spending back into alignment. And, so the theory goes, they will eventually start spending when they are satisfied they have their debt under control.

But Simon Warner and Andrew Scott from AMP have taken a long-term view of the household savings ratio over 50 years that shows savings remain below historical levels.

In graphical form, they show how the household savings ratio bounced around between 10 per cent and 15 per cent from 1959 until the mid-1980s .

It then began to drop dramatically, falling below 10 per cent and sliding to virtually nil by 2000 when savings rates went negative as the era of cheap debt flourished.

For much of the past decade, savings rates have been between negative 5 per cent and plus 5 per cent .

Now in the wake of the financial crisis, they have jumped back strongly to between 5 per cent and 10 per cent. Warner and Scott point out that while in the US and Europe deleveraging of household balance sheets was forced, in Australia it has been done against the backdrop of a stronger economy.

So while retailers are hoping consumers can amass "considerable firepower for future spending via a much strengthened balance sheet", AMP ponders whether savings rates will return to the higher levels of the past 50 years.

The analysts conclude that the savings rate increase "has been meaningful" and note that "the risks around the savings rate remain to the upside". Something unlikely to cheer struggling retailers being buffered by anaemic demand and structural challenges from online sellers.

TAXING TIMES

In an unusual development, someone other than James Hardie is at risk of looking like the bad guy in the funding arrangements of asbestos victims.

While James Hardie's successful appeal before a full bench of the federal court spells good news for asbestos victims, the ball is now in the taxman's office about whether to appeal. It is worth noting the taxman has never appeared too concerned about perceptions of popularity.

Hardie initially lost the case in which the Australian Taxation Office claimed $368 million was owing in unpaid capital gains tax, penalties and interest from a 1998 corporate restructure. The Federal Court yesterday ruled unanimously the restructure did not involve a benefit in contravention of Part IVA of the tax law, which prohibits a "scheme" whose dominant purpose is to avoid tax. The Tax Office has 28 days to decide whether to seek special leave to appeal.

If there is no appeal, James Hardie will be refunded the $242.4 million it has paid to the Tax Office since 2007, comprising half the disputed amount plus interest and legal costs. This would strengthen its operating cash flow, which is used to determine its annual contributions to the Asbestos Injuries Compensation Fund which stands to receive $84.8 million. Had it lost, James Hardie faced the awkward prospect of bestowing dividends on shareholders in a year where it made no contribution to the fund that helps sufferers of asbestos-related diseases.

IN THE DUMPS

Australia's biggest listed rubbish collector Transpacific Industries will slash the carrying value of assets by $367 million, worse than the previous guidance of between $231 million and $256 million.

The main reasons for the disparity from its June disclosure were bigger losses from its manufacturing division and lower-than-expected valuations on industrial properties in Victoria.

It leaves Transpacific on course to post a loss of between $272 million and $304 million when it unveils its full-year results tomorrow. The market was nonplussed about the bigger write-down as it makes little difference to the quantum of outstanding debt Transpacific has to pay interest on.

From the shareholders' perspective, the biggest drag is the company's debt burden of about $1.5 billion - a hangover from a pre-financial crisis acquisition binge.

With the board intent on grinding its way towards an improved balance sheet position, some investors are wondering whether it is time for Transpacific to bite the bullet by recapitalising.

A capital raising is not pleasant for existing shareholders but it might be the surest way of reducing the financial risks, rather than the board's focus on internal cash-flow generation.

TAKING STOCK

Only hours after announcing a share buyback - which he said he wasn't keen on ten days earlier - Stockland's Matthew Quinn has kick-started an asset sales program.

This will include the group's 50 per cent stake in 52 Martin Place and all of the Riverside Plaza in Melbourne. Last Friday, Quinn said the group was reviewing a number of capital management initiatives.

Analysts suggested Quinn could create a new wholesale fund along the lines of Westfield Retail Trust to enable a quicker focus on its 3-R (retail, retirement and residential) strategy without diluting earnings. But one sale program that could have hit a hurdle is the proposed deal to divest seven industrial assets to the planned 360 Capital Industrial Fund.

With the help and advice of UBS and Patersons Securities, 360 Capital had been looking to buy about $214 million of Stockland assets and raise $250 million in fresh equity. It is now believed to be working on plans for a scaled-back offering after reporting season or even holding off until the market volatility subsides.

Ian McIlwraith is ill.