Retailers can rejoice in Rudd's policy flow

Kevin Rudd’s new policies have a chance of snapping consumers out of their hibernation, in a development that will delight retailers like Myer’s Bernie Brookes.

Although it will annoy Coalition supporters, Kevin Rudd really did his homework in his period on the backbench.

And the advantage Rudd now has over Tony Abbott really surfaced when Business Spectator editor Jackson Hewett interviewed Myer chief executive Bernie Brookes on Meet the Press.

As I will explain below, Brookes revealed to Hewett that the current lowering of interest rates was not working and convincing Australian consumers to spend might mean duplicating the US model – with interest rates going to token levels (Retailers face uphill climb: Brookes, July 27).

Brookes has been studying the transcripts of countless consumer focus groups as he seeks to determine why consumers are not spending. There are the obvious pointers such as the fact that consumers are now spending more on Foxtel, mobile phones/tablets, school fees and medical benefits so have less discretional retail expenditure. 

But Brookes isolated one reason above all those – endless wrangling in the federal parliament – wrangling that, according to Brookes, absorbed half the time in the 43rd federal parliament.

Brookes did not say this but clearly Coalition Leader Tony Abbott will have been blamed for much of the endless fighting between Abbott and Julia Gillard.

Kevin Rudd came in and started announcing new policies including the motor fringe benefits tax changes and the Papua New Guinea refugee plan. He has pushed the Gonski education policy hard. He is on the front foot setting the agenda – exactly what Brookes finds his customers want.

Tony Abbott is still on the negative, saying the Papua New Guinea refugee policy will not work and that he will not follow the FBT changes.

In coming weeks, Industry Minister Kim Carr is probably going to "save" the local motor industry and there will be other “positive” moves. For example there is an idea to send the unemployed to “boot camps” to teach them discipline. That might not happen, but Rudd is diverting attention from the budget with controversial ideas.

And each time Tony Abbott gets caught on the negative – so much so that some say if Rudd delays the election too long he will be facing Malcolm Turnbull (Rudd must call a snap election – or face Turnbull, July 19).

Whether Rudd can deliver where he couldn’t when he was last prime minister is a totally different issue. He is addressing what the consumers want – to do something rather than continuing to attack Tony Abbott.

Tony Abbott is still in the “attack Kevin Rudd” mindset and is waiting for the election bell to be rung before explaining his vision. Rudd believes it will be too late.

Finally, Brookes confirms what Boston Consulting Group concluded in its survey that interest rates are not motivating consumers, who are in savings mode. They are on strike (The consumer strike threatening Australian retail, July 26).

Brookes says that in the US it was necessary to reduce interest rates to token levels, which then stimulated housing prices and consumer demand. Such a strategy makes putting the money in the bank of very marginal value but in Australia it would send house prices through the roof.

Nevertheless I suspect what we are going to see is even lower interest rates, but curbs in government expenditure as well.