Our wallets slam shut Retail sales in a slump as cost of living soars

AUSSIES put the brakes on spending last month, leading to the biggest slump in retail sales for more than four years.

Households spending fell by $230 million during the month. The biggest cutbacks were in spending on household goods, cafes, restaurants, takeaway foods, and groceries.

Queensland suffered one of the bigger slumps as hefty power bills and low wages took a toll. The Australian Bureau of Statistics yesterday reported retail spending fell 0.6 per cent during August.

Cash registers clocked up just $25.88 billion, compared with $26.11 billion in July.

The nationwide slump took economists and forecasters, who had been expecting a slight increase in shop turnover, by surprise.

The severe fall has further raised concerns that consumers, dealing with stagnant wages and surging utility bills, are swamped by higher living costs and debt.

“Apparently Australians were dieting over August,” Bank of Melbouirne economist Janu Chan said yesterday.

“Today’s data reinforces the Reserve Bank’s concern that slow wage growth and rising household debt levels would restrain spending,” he said.

“These factors will likely continue to limit consumer spending for some time. The recent strong growth in employment has not been enough to counteract these headwinds,” he said.

The Australian Retailers Association said a few sectors, such as gambling and online retail, showed increased spending, but general retail had “suffered significantly”.

“With increased energy costs, higher tax burdens and an inflexible wage system, we need government action to increase consumer and business confidence,” executive director Russell Zimmerman said.

Retail sales in Victoria, Queensland and the ACT fell by 0.8 per cent, in Tasmania and the Northern Territory by 0.7 per cent. Western and South Australia both reported a 0.6 per cent fall; NSW was down just 0.2 per cent.

“At face value, the story in August seems to be that Aussie consumers stayed inside their warm homes and shopped online, rather than venturing outside,” Commsec chief economist Craig James said.

“It may be that retailers trimmed prices to encourage higher sales. And weighty electricity and gas bills may also have prompted consumers to cut discretionary or non-essential spending,” he said.

JP Morgan economist Ben Jarman said the plunge in spending cast doubt on the prospect of a rise in interest rates any time soon.