Tills not ringing enough
Retail rehab reliant on wages turnaround
CONSUMERS seem to have made it clear they’ll give retailers little to cheer about this Christmas, but 2020 could be a different story if house prices continue to soar and wages and jobs growth beat expectations.
A flatlining retail spend – both symptomatic of and contributing to Australia’s sluggish economic growth – is expected to continue over the festive season as confidence sags and debt-laden households bank any recent stimulus windfall instead of hitting the shops.
But a report by financial services firm Deloitte also says a retail recovery is possible when the new year ticks over – so long as property prices continue their upward trajectory, and economic indicators outperform current expectations.
Weak volumes and aboveinflation retail price growth have hurt retailers’ margins in 2019 in what is considered to be the softest retail environment since the 1990s recession.
Poor consumption is also keeping the labour market loose and stifling a pick-up in wages, even after three RBA rate cuts and billions in government tax offsets have been made to try to get cash flowing through the economy.
However, Deloitte Access Economics partner and Retail Forecasts principal author David Rumbens said real retail spending was expected to grow 2.6 per cent over the year to September after slumping by 0.2 per cent in the previous 12 months. This is contingent on interest rates remaining accommodative – with the RBA tipped to cut to a new record low 0.5 per cent in February – and on a property market continuing to correct an 18-month downturn and hit new peaks in March.
Deloitte said a tightening labour market and a pick-up in wages would be key to any recovery, even though the RBA was not expecting any joy on either front for some time.
“Stronger wage growth, improvements in the housing market, and stabilisation of price pressures are all expected to support a recovery in consumer demand,” Deloitte’s November Retail Forecasts Summary says.
“The RBA and Federal Government are also doing their part to support the economy, with further interest rate cuts on the cards and a bring-forward of some Commonwealth infrastructure spending.”
HE SAID IT
Andre sees the opportunities that the future holds for the company as we return to our core focus of discount variety retailing.