Australia has ushered in a “retail recession” and recorded its second quarter in a row of declining spending in inflation-controlled terms.
Real retail turnover has recorded a 0.6 per cent fall in the March 2023 quarter, hot on the heels of a 0.3 per cent fall in the December quarter.
Deloitte Access Economics has been warning of a looming “retail recession” – marked by two consecutive quarters of real retail turnover decline – for several months.
In the latest edition of the group’s retail forecast report, Deloitte Access Economics partner David Rumbens warned of a broader “consumer recession” – which would include a pullback in services as well as goods – at some point in 2023.
“High inflation and rising interest rates have eroded the purchasing power of consumers and, in response, consumer sentiment is now at historically pessimistic levels,” Mr Rumbens said.
He said it was undeniably a grim time for retailers but there were some silver linings on the horizon, including the expected influx of migrants.
Around 400,000 migrants are expected to land in Australia in 2022/23 and 315,000 in 2023/24.
Thanks to the upcoming population growth, Deloitte economists are expecting retail turnover to lift from a 0.7 per cent decline across the 2023 calendar year to 1.3 per cent growth in 2024.
The return to real wage growth sometime in 2024 should also support a turnaround in spending.
“This would not be a boom – indeed, it’s still below the expected rate of population growth,” Mr Rumbens said.
“But it is better than the recent picture of going backwards, and the anticipation of sales growing once again may allow consumer and retailer sentiment to start improving towards the end of 2023.”
The retail slowdown has not been felt evenly, with food sales growing by a healthy 1.7 per cent in real terms in the past six months.
Non-food retail, however, has seen sales fall by 3.7 per cent.
