Worrying sign Aussies already in ‘recession’
Written by admin on August 28, 2024
Australia’s retail sector has been in recession for the past 18 months – and recent trade data is bearing the hallmarks of an “economic horror show” for retailers between now and the Christmas holiday period.
The grim call by Deloitte Access Economics partner Dave Rumbens follows retail spending declining across six of the last seven quarters, as Aussies grapple with the soaring cost of living and rising interest rates, coupled with slowed wage growth.
Real GDP growth over the year to March came in at 1.1 per cent, the slowest annual growth outside the pandemic since the 1990s.
Consumer spending only grew 1.3 per cent over the past year.
Despite this, Mr Rumbens said it wasn’t a surprise for the retail sector against the background of a weakening labour market and rising business insolvencies.
“The numbers only look worse on a per capita basis,” he said.
“Real per capita retail spending has contracted for the last eight quarters and is now 2.5 per cent lower than June 2023, and 6.3 per cent lower than June 2022.
“The evidence shows that Australia’s retail sector has effectively been in recession for the last 18 months.
“While these figures are poor, it’s the one-third of consumer spending that goes to retailers that is going backwards, with negative growth of 0.6 per cent in real spending over the year to June.”
Mr Rumbens said the figure provides further evidence the economy remains weak and the Reserve Bank of Australia (RBA) did not need to raise interest rates.
The high cost of living, increasing insolvencies, elevated interest rates and a weakening labour market bear all the hallmarks of an “economic horror show” and a “repeat” of dire conditions in 2023, the latest edition of Deloitte Access Economics’s Retail Forecasts states.
“The period from now to Christmas is still expected to be a difficult one for retailers, but perhaps less of a slog than it has been,” the report states.
“Retailers are getting used to seeing a consumer group which on average is cautious and value conscious.”
Mr Rumbens said new cost of living relief measures, in the form of energy bill relief and tax cuts, would boost disposable income and help lift retailers out of the recession.
2025 and 2026 are expected to show further improvement – with real retail turnover growth is expected to strengthen from 0.3 per cent in 2024 to 1.5 per cent in both 2025 and 2026.
The report follows the monthly July Consumer Price Index indicating inflation has eased to 3.5 per cent.
Underlying inflation levels also eased by 0.3 per cent to 3.8 per cent.
