Australian retail spending has surged through most of 2020-21 benefiting from captured consumers who had little else to spend on through the pandemic.
However, those retailers who profited from a restricted economy are likely to face headwinds in the new financial year, according to Deloitte Access Economics’ latest quarterly Retail Forecasts. And retailers just might have to compete for consumers’ dollars as more opportunities for spending open up.
“While 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 supporting what is likely to be the strongest gain in retail spending in a decade,” Deloitte Access Economics partner, David Rumbens said.
But he warned that the the next shift in consumer spending is also underway. “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. March quarter data shows that that shift is already underway, with retail spending growth slowing from the heady days of late 2020.
“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.”
According to Rumbens, 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. Non-food industries will likely experience the greatest slowdown in retail spending into 2021-22, especially apparel and household goods retailing
“Household budgets in 2020 benefitted from substantial fiscal stimulus, but this tap is being turned off,” he said. “An astonishing 5.5% real spending growth in 2021-22 is needed to meet budget expectations, despite little offered for household income.
“Luckily the war chest of savings built up for many over the past six months is starting to be drawn down, providing some buffer for household spending. These savings will certainly play a pivotal role in supporting spending going forward.”