Christmas bounce falls flat for shops

Retail spending growth this Christmas looks likely to fall short of predictions.

Retail spending growth this Christmas looks likely to fall short of predictions, which were already the weakest in 11 years of forecasts by the Australian ­Retailers Association.

The increasingly dour outlook is likely to cap a tough year for retailers, following the bushfires crisis that has led to shoppers staying home to avoid heavy smoke in major cities such as Sydney.

“People have a lot on their mind other than Christmas, and rightfully so,” ARA executive ­director Russell Zimmerman said. “People are concerned about fire and the drought.”

The ARA expects shoppers to spend $52.7bn between November 14 and December 24, an ­increase of 2.6 per cent on the same period last year. The ARA projects that Australians will spend a further $18.7bn in the post-Christmas sales, or 2.4 per cent more than a year ago.

While only a relatively small proportion of Australians would have been directly affected by the bushfires, smoke haze and dramatic headlines will have “adversely affected people’s confidence­”, AMP Capital chief economist Shane Oliver said.

Business leaders have warned that the damage to tourism and retail spending from the bushfire emergency could be a drag on the economy through the ­December quarter.

“The problem is that this is occurring at a time when consume­r confidence is already ­depressed,” Mr Oliver said. “Combining bushfires with weak wages growth, a high level of ­underemployment and uncertainty around the economy and it’s just not helping.”

Economists have fretted that tax relief and interest rate cuts have done little to spur spending, with evidence that households have instead chosen to save or pay down debt. But Mr Oliver said the economy, while not in great shape, “would be a lot worse were it not for those two stimulus measures”.

Mr Zimmerman said studies from the likes of Deloitte Access Economics suggest the potential for a rebound in spending in 2020, pointing to continued ­labour market strength and ­predictions, including by the ­Reserve Bank, that economic ­activity will lift next year as tax relief, rate cuts and an improving global economy provide support.

Rising house prices should boost spending on goods such as furniture, Mr Zimmerman said.

The Christmas shopping seaso­n represents 12 per cent of total non-food turnover for the year, according to ANZ.

Australians appear to be takin­g a cautious approach to their finances, reining in consum­ption despite record low interest rates, low unemployment and strong jobs growth.

Retail turnover fell over the year to September for the first time since the recession of the early 1990s. Official data released this month showed no growth in turnover in October.

NSW and Victoria are enjoying a resurgence in home prices, but that is yet to flow through to a more confident consumer, with retail trade in those states falling in October. Retail sales in ­December last year were 29 per cent higher than the average for the previous 11 months, according to ANZ research. That Christmas boost, however, was 45 per cent in the late 1980s.