I have been writing for some time how Government bond issues are a good forward indicator of taxation receipts and therefore consumer spending and confidence. Today's retail sales figures demonstrate the caution of the consumer and the current financial constraints faced by the Government.
Total Federal Government debt finished 2010 off with $174.8 Billion on issue. Since then there has been the following movements:
Starting Debt: $174.80 Billion
Treasury Note Issues: $8.80 Billion (Short-term debt)
Bond Issues: $4.70 Billion (Long-term debt)
Inflation Indexed Bonds: $0.20 Billion
Total Issues: $13.70 Billion
Redemptions: ($7.10) Billion
Net Issuance: $6.60 Billion = Total outstanding 4th February - $181.4 Billion
The Government has some task ahead of them. Julia Gillard has politically committed to a balanced budget in 2 years, but a lack of bank lending growth and the lackluster retail sales released today, points to minimal growth in tax revenue and hence the need to issue debt to fund current expenditure. The deficit is currently running at between a $50 to $60 Billion deficit per annum, so to achieve their target the community will need to expect large spending cuts, with Anthony Albanese on ABC's Lateline tonight not ruling out cuts to Welfare payments.
Retailer, Myer's shares fell 11% today on the back of a profit warning and weak retail sales, together with the broader consumer stocks falling .8%. Bernie Brooks, Myer CEO, went from predicting a 5% profit increase in November, to now predicting a 5% decline. Bernie Brooks said consumer confidence fell in January. Current Government debt issuance suggests that this trend should continue.