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Chart of the week: A shopping list of reasons for Australia’s soft retail spending

4 April 2018

Bob Cunneen, Senior Economist and Portfolio Specialist, NAB Asset Management


Australian nominal retail spending

Source: Australian Bureau of Statistics

 

Australian retail spending has struggled over recent years. For the year to February 2018, retail spending only increased by 3% (black line). This is soft spending growth compared to the average 4% annual pace from 2012 to 2016 (red line).

Why has retail spending been so soft? Well there is a shopping list of possible reasons. Rising electricity and health costs have crimped household budgets. There is limited scope to go shopping when the essentials of electricity and health costs have become expensive nightmares. Even generating income has been a struggle in this era of slow wages growth and very low interest rates for savers. The burden of paying off high household debt also worries consumers.

Yet there are some early encouraging signs that retail spending could gradually improve this year. The recent run of strong employment gains should eventually translate into rising wages. Consumer sentiment also seems to have improved with diminishing concerns over job security. So the Australian consumer could soon be causing traffic jams at the counters and at the parking spots. 

 

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