John Linton
After flipping through the usual dozens of pages of post budget night 'analysis' and 'what this means for you' (even in allegedly fiscally intelligent papers such as the AFR) I think these two small articles sum up where 'the average Australian and the average Australian business' stands at the moment:
http://business.smh.com.au/buy-now-pay-even-later-harvey-norman/20080513-2dvp.html
which has some details on why Harvey Norman's share price has dropped 50% over the past year and why they are now offering 44 months interest free terms and this one:
http://business.smh.com.au/borrowing-down-across-the-board-as-rates-sting/20080513-2dvl.html
which provides some data on how residential and business borrowing has dropped across the whole range of lending services over the past quarter - and particularly over the past month.
If you combine the information in those two small articles you could reach the conclusions that:
1) People are paying off their credit cards rather than using their credit cards to buy things
2) Businesses are reducing their borrowings and, where they are able to, reducing their commitments on repayments
3) Retailers, like HN, are having to discount very, very heavily to maintain sales at last year's levels and shareholders have lost faith in them being able to sustain that model
4) HN is a 'bell wether' for retail generally and the interest rate hikes by the RBA are about to collapse spending confidence and all that leads to will now become a reality
5) Unless the proposed tax cuts put a brake on these general views the second half of 2008 is going to see significant job losses and all that brings with it.
We notice that our level of failed monthly payments and the time it then takes for those customers to be able to then pay for their services has again increased in May, not cripplingly, or even at a worrying level as yet, but the trend is obvious and has been slightly increasing in terms of the time between default and eventual payment each month since January 2008.
In ADSL terms we have noticed a fairly sharp increase in 'churns' to Exetel (almost twice the rate of the last quarter of 2007) and a slight reduction in churns away from us compared to the last quarter of 2007. As we offer the lowest cost ADSL service in Australia that's also probably an indication of people looking for economies in their monthly expenditures - or just some short term anomaly - I don't have any real ability to detect which.
Having said that, the relatively low number of churns away from Exetel still go almost 50% each, every day, to Telstra and TPG whose ADSL2 offers are still impossible to match in two segments of the market:
TPG - Large ADSL2 downloads for very low price appealing to the heavy/inexperienced downloader
Telstra - $110.00 'cash back' and an ADSL2 bundle that is below our cost
There are no churns away from Exetel to any other provider that aren't matched or significantly 'over matched' by churns from those ISPs (churns to Exetel still exceed churns away from Exetel by over 5:1). The major sources of churns to Exetel are almost 50% from 'no name' ISPs (which includes Dodo), 25% from Bigpond and the rest from the remaining 'top 10' ISPs.
The increase in churns from Westnet would be easily explainable as a 'knee jerk' reaction to the takeover by iinet. The 'jump' in churns from small companies has steepened but we don't keep separate statistics - it seems that more of those very small companies are shutting up shop over the past few months, or showing signs of shutting up shop, than the last quarter of 2007.
So the impression I get is that ADSL customers are beginning to look for monthly savings more than they did in 2007 as a consequence of having less 'disposable income' in 2008. There are some other signs that there are difficulties in the ADSL marketplaces if you look at the various pricing and 'promotional' activities from various ISPs which are often puzzling (at least to me) and sometimes quite bizarre.
I will have to look at a 'year end' promotion to get with the trend.