Australian Retail Problems Not Caused by the Mineral Sector

There is clearly something wrong with the Australian economy. We seem to in the same position of Indonesia several decades ago when it had oil and the high price was pushing up the value of the currency. A high currency makes it difficult for those producing "non-boom" products to export. That is why the US is printing more dollars to weaken the currency, improve the economy and create more jobs. Nothing much is happening for it though because the US dollar is the major international currency as gold used to be.

Just why Australian shopkeepers are crying fowl is more difficult to understand. A strong currency means imports are cheaper. Australians are very import dependent in their spending habits and buying cheap imports is what they like to do. They buy such imports over more expensive Australian made products, but this shouldn't hurt the bottom line of retailers.

They claim Australians are spending less. Though figures show this to be the case, spending is not that easy to understand. If people save, the banks have more money to lend out to business and those who want to go into debt. However, due to the financial crisis Australian banks have tightened up on lending criteria. They will no longer lend to those with no offsetting assets. In other words, banks are withholding money. This money is not active within Australia. It may be invested overseas by banks.

The retail sector is wrong to blame exporters of minerals, the economy in general or interest rates. Obviously, the cause of reduced spending is the behavior of banks. Government could force the hand of banks. It will not do this as politicians fear a bank crisis occurring here in Australia. Some European countries were devastated by the global banking crisis. Their governments lost billions in propping up banks by giving them money that borrowers could not pay back.  It was taxpayers money they were "giving" away.
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Economics by Ty Buchanan
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