Australia's Lifestyle Revolution

Excerpt:
"That lead me to my next encounter and potentially the most dramatic weekend story. A senior insurance executive told me that he was puzzled by the latest trends in car insurance. It was too early too tell (“come back in three months”, he said) but there were signs that a lot of people were locking up their second car and using it only when they had to. Accordingly, they were not comprehensively insuring it."

Article
I had one of those weekends where I kept running into people with fascinating perspectives on the looming acceleration of the economic downturn. My conclusion is that the early indicators we have seen are the forerunner of a much steeper downturn which will unfold over the next six months.

There is no doubt interest rates will fall. However, there are also signs that a legacy of this downturn may be dramatic lifestyle changes.

My first encounter was with a national display home builder and marketer who told me that his current sales were down only marginally but that attendances at his display villages were down 40 per cent in Queensland and Victoria.

He had checked with his rivals and found they were having a similar experience. In NSW it has been a disaster for a long time. Those lower numbers will almost certainly translate into a large fall in new home orders and, later, in building. What surprised the builder is what is happening in Queensland. He had believed for a while that Victoria was too strong, but had expected Queensland to hold.

The obvious cause was that the combination of higher interest rates, a credit squeeze, a very tough time for contractors, plus higher food and fuel prices that were slashing demand for new homes. But a rather unexpected reason bobbed up – people were not driving their cars at the weekend unless they really had to.

That lead me to my next encounter and potentially the most dramatic weekend story. A senior insurance executive told me that he was puzzled by the latest trends in car insurance. It was too early too tell (“come back in three months”, he said) but there were signs that a lot of people were locking up their second car and using it only when they had to. Accordingly, they were not comprehensively insuring it.

If that turns into a lifestyle change then we are in for a enormous blow to all sectors of the motor industry – makers, retailers, toll roads and repairers. It will transform public transport. By coincidence, in Victoria over the weekend the local transport minister was explaining how the weekend use of buses had skyrocketed. These building, insurance and bus anecdotes may be early indicators of an unprecedented lifestyle change.

Later, I ran into some Harvey Norman people who said they were enjoying the pre-Olympic boom in TV sets, but all the signs were there for a steep fall in activity.

A major social organisation which is supported by a large number of contractors reports that its annual dinner dance, which is normally rushed, sold less than 30 tickets – break even is about 160. The event was cancelled.

In Victoria the slump is being accentuated by the looming dramatic rise in private school fees in 2009 after Premier John Brumby handed out double-digit pay rises for key teacher classifications, but gave no extra money to private schools. Kevin Rudd has not come to the party.

What people on the edge are doing is budgeting and cutting down all unnecessary expenditure and this will show up in some very dramatic declines in the next six months.

Source: Business Spectator, written by Robert Gottliebsen