WITH international borders still closed for another year, Australia’s economic recovery will be supported by an anticipated boost to consumer spending over 2021-22, with lifting confidence leading households happier to dip into savings.
According to Deloitte Access Economics’ latest Retail Forecast report, retailers will have to compete for their share of this increased spending, with options becoming less limited as the economy opens up.
“Australian retailers are set to record a bumper year in 2020-21. Spending options have been limited, and with many households having cash to burn, consumers flocked to retail. This has supported what is likely to be the strongest gain in retail spending in a decade,” said David Rumbens, partner and principal author of the Retail Forecasts report.
“Australian consumers have more options for spending with the easing of restrictions and a need for social contact is supporting eating out and other activities at the expense of other retail spending,” added Rumbens.
While over most of the 2020-21 period retailers benefitted from consumers having fewer ways to spend, those same retailers are likely to face headwinds moving into the new financial year.
“March quarter data shows that that shift is already underway, with retail spending growth slowing from the heady days of late 2020,” said Rumbens.
Volumes fell over the first quarter of 2021, with retail spending dropping by 0.5%, while in 2020-21 retail spending is expected to reach 5.9%, becoming the fastest period of growth in a decade.
Following this growth however, 2021-22 is expected to see far less significant gains, growing only by an anticipated 0.9%.
Over the 2021-22 period, offering outside of food industries will see the greatest stall in spending, with this trend being particularly apparent in both apparel and household goods.
“On the other hand, and with Victoria’s recent lockdown the most recent case in point, we are not necessarily snapping back to an open society.
“With international borders still closed for another year, and city-wide lockdowns still happening, overall, retailers can expect sales to remain well above pre-COVID levels, despite a slowdown in spending growth over 2021-22,” said Rumbens.
Deloitte’s forecast reinforces a CBRE report which found $60 billion that Australians typical spend on international travel is being spent locally.
Additionally, with financial stimulus initiatives and supports coming to an end, if not already concluded, this forecast for strong spending relies on households dipping into their savings.
“Household budgets in 2020 benefitted from substantial fiscal stimulus, but this tap is being turned off. An astonishing 5.5% real spending growth in 2021-22 is needed to meet budget expectations, despite little offered for household income.”
According to Rumbens, the war chest of savings many households built over the pandemic will create a buffer for spending, that is starting to be drawn on.
“The signs so far are that consumers are willing and able to play their part in Australia’s economic recovery, but the hit to disposable income, limited population growth and the ongoing vaccine rollout place some risks on that growth for 2021-22,” concluded Rumbens.
