July 26, 2011 10:11 PM EDT
Reserve Bank Governor Glenn Stevens has once again demolished a storyline from the investment markets that had developed about retailing and consumer spending.
In a speech in Sydney yesterday, he reminded listeners and readers of his speech of that old adage, 'what goes up must come down'.
In this case it's the story about cautious consumers ruining retailing in this country.
He pointed out that the present caution and high savings rate will ease in the near future: when, he couldn't say.
And when that does, he warned us not to expect a return to the high spending, high consumption days of a decade and more ago.
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Mr Stevens pointed out something that all the moaners had missed: that all big shifts in economic behaviour and activity come to an end eventually (remember the GFC and the way it crunched long spending boom, and the era of low risk and low cost money?).
This most basic point in all stories had been ignored by the henny pennies in the investment community and business and political media.
The newspapers and business websites have been full of retail doom and gloom, especially after David Jones downgraded its sales and profit figures a fortnight ago.
And it continued after the trading update and restructuring announcement on Monday from Premier Investments, which controls the Just Group chain of seven retail brands.
The RBA Governor first pointed out two years ago in a speech in the same venue (to the annual lunch of a Sydney charity, the Anika Foundation) that the rising level of savings by consumers would impact consumption.
He said, "As I said at a previous Anika Foundation lunch two years ago, the role of the household sector in driving demand forward in the future won't be the same as in the preceding period.
"The current economic expansion is, as we all know, characterised by a very large build-up in investment in the resources sector and expansionary flow-on effects of that to some, but not all, other sectors of the economy.
"It is certainly not characterised by very strong growth in areas like household consumption that had featured prominently in the preceding period."
It took the best part of 18 months for that message to get through to the markets, especially analysts and investors.
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