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CHART OF THE WEEK: ARE AUSTRALIAN CONSUMERS DOWN AND OUT FOR 2019?

15 January 2018

Bob Cunneen, Senior Economist and Portfolio Specialist

 

Retail trade vs House prices


Sources: Australian Bureau of Statistics and CoreLogic. 

 


Retail spending has been growing at a snail’s pace over recent years given the challenges of rising electricity costs, high household debt and sedate wage gains. The most recent November 2018 data shows retail spending only growing at a 2.8% annual pace (blue line).

Adding to the consumer’s ‘shopping list’ of worries is the negative wealth effect from falling house prices. Australian house prices have fallen by -6% in the year to December 2018 (red line) according to CoreLogic. There has been a sharp -9% decline in Sydney house prices and a -7% fall for the Melbourne housing market in 2018. This decline in Australian household wealth with falling house prices could make the consumer even more cautious about their retail spending.

Yet there is still some hope that consumers can remain resilient to falling house prices in 2019. The current strong jobs growth should eventually lead to household incomes being boosted by wage gains. Even the recent sharp fall in petrol prices will help consumers better afford the journey to the shops. So consumers may be ‘down’ in spending compared to past years but they still have some scope to go ‘out’ this year.

 

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