Boxing Day sales a last hurrah for Australian shoppers before cost of living hits

Boxing Day kicked off a frenzied shopping spree that could add some $23.5bn to cash registers between now and mid-January but could be a last hurrah before cost of living pressures bite.

The ARA is predicting consumers will spend a record $23.5bn during the Boxing Day sales – which last from Monday until mid-January – an increase of 7.9 per cent over last year. Picture: Liam Kidston

Australians have embarked on a frenzied Boxing Day sales shopping spree that is expected to be a “last hurrah” of consumer spending before cost-of-living pressures bite household budgets in the new year.

With the next likely official interest rate rise from the Reserve Bank still six weeks away and credit card bills from Christmas yet to arrive, consumers were expected to load up at post-Christmas sales, fuelling a $23.5bn splurge, before their budgets collide with economic reality in 2023.

Crowds at Sydney’s Pitt Street Mall on Boxing Day. Picture: Getty Images

Paul Zahra, the head of the Australian Retailers Association which represents the $400bn retail sector, said on Monday: “There’s no doubt that the rising cost of living and the rising cost of doing business will collide at some point this coming year.

“According to some, that is more than likely to be around the middle of the year.”

Mr Zahra said the Christmas-Boxing Day shopping spree was a case of “freedom spending”.

“It is the first Christmas in three years that people could get together with family and friends, and then this is the first summer where people can get to see family and friends,” he said.

“So it is definitely looking like a very strong January … but it will definitely hit us at some point and retailers are planning to batten down the hatches.”

He said the hit to spending was likely to come in winter.

Shoppers at Highpoint shopping centre in Melbourne. Picture: David Crosling

The ARA is predicting consumers will spend a record $23.5bn during the Boxing Day sales – which last from Monday until mid-January – an increase of 7.9 per cent over last year.

AMP Capital chief economist Shane Oliver said the retail spending needed to be placed within the context of the $2 trillion-plus national economy, with some of that lift in sales dollars pushed by inflation.

Mr Oliver said he viewed these holiday sales as the final big splurge from consumers before they are slapped with the reality of higher mortgage repayments and other living costs that will force them to rein in spending in the new year.

“I think it probably will be the last hurrah because we are starting to see the impact of higher interest rates, consumer confidence is at recessionary levels,” Mr Oliver said.

“I think it is starting to dawn on people how much has been taken out of the pay packet now because of the mortgage rate increases. And the cost-of-living pressures are starting to impact now as well. It often takes a while (longer) for these things to impact than many of us, including economists, allow for. It takes a while for the banks to fully pass on RBA rate hikes and so on.

Consumers were expected to load up at post-Christmas sales, fuelling a $23.5bn splurge. Picture: David Crosling

“But those things are really starting to impact now and if you’re on a $500,000 mortgage, the mortgage payment just on current interest rates is going to be $10,000 to $11,000 higher than it was a year ago and that’s going to come from somewhere and it is going to come from spending as retailers feel the pinch.”

But for now the stores are full and shoppers are out for a bargain. The mortgage payment can be next year’s problem.

“It is looking really positive and we are expecting more than 120,000 shoppers through the doors today,” said Amy Wotton, head of marketing for Melbourne’s Chadstone Shopping centre, the biggest shopping mall in Australia in terms of sales.

“We opened positively at 6am this morning and there were long queues at some of the really popular stores such as Culture Kings and Lululemon, and we are considerably up on last year.

Ms Wotton put down the Boxing Day lift to a number of factors, including some outside of retailer control such as the weather.

“I think the (Boxing Day) sales offers are really strong, it’s a really warm day, it’s going to be around 32C and last year on Boxing Day it was 18C or 19C and people who might question when they are going to shop could come in today to avoid the extreme heat.”

A spokesman for Myer said the Myer Stocktake Sale was proving incredibly popular, with its customers taking advantage of some of its best offers this year.

Originally published as Boxing Day sales a last hurrah for Australian shoppers before cost of living hits