Locked-down Victorians struggled to spend in August, ABS retail trade figures show

Retail trade pulled back sharply in August, as a collapse in spending in locked-down Victoria led declines across the country.

The retail recovery form the depths of the recession reversed in August, led by a collapse in spending in Victoria. Picture: Damian Shaw

Retail trade suffered a sharp reversal in August, as a collapse in spending in locked-down Victoria led declines across the country.

Monthly turnover dropped 4.2 per cent to $29.4bn, according to preliminary and seasonally adjusted figures from the Australian Bureau of Statistics, bringing a three month retail rebound to an abrupt end.

Despite the reversal in August, retail spending remained 6.9 per cent higher than a year before, the ABS figures showed.

Victoria’s second wave of virus cases and associated restrictions drove a 12.6 per cent plunge in spending in the state, with “large falls across all industries except food retailing”, ABS director of quarterly economy wide surveys Ben James said.

“Stage 3 and 4 restrictions saw many businesses unable to trade from their physical stores in August,” Mr James said.

But the pullback in spending was not just restricted to Victoria, with retail turnover across the rest of the country falling 1.5 per cent in August versus July. Most states and territories recorded falls, the ABS said.

NAB economist Ivan Colhoun said the August result needed to be viewed in the context of “very strong” sales growth in June and July. Mr Colhoun said retail turnover was 19 per cent above the low in April, and 6 per cent higher than in February, before the pandemic struck.

“The key focus from here will be the extent to which retail spending eases with the reduction in government income support payments from the end of this month,” he said.

The data revealed Australians are winding back their purchases of household goods, but spending remained well above levels of a year prior.

Clothing, footwear and personal accessory retailing, department stores, and cafes, restaurants and takeaway food services, had large falls, the ABS said, while food retailing recorded a small fall.

The monthly ABS figures suggest consumption may have lost momentum half way through the quarter. But card spending data from the country’s big banks, which include money spent on services, have presented a more optimistic view and suggested consumers could drive a solid rebound in the three months to September.

ANZ economist Adelaide Timbrell said spending by her bank’s customers “suggest retail sales will pick up a little in September, but won’t be as strong as during the earlier stages of the pandemic”.

“The looming reduction of JobKeeper and JobSeeker payments, as well as the first raft of mortgage deferral expiries, may be keeping households more cautious than they were in previous months,” she said.

Reserve Bank governor Guy Debelle yesterday flagged that rate cuts could be warranted to lubricate a recovery which described as a “slow grind”. This morning, Westpac chief economist Bill Evans said he now expected the RBA at its next meeting on October 6 – the same day as the federal budget – to lower its target for the cash and three-year rates to 0.1 per cent, from 0.25 per cent.

“The theme is likely to be, as we saw in March, a Team Australia moment where the Reserve Bank is directly supporting a bold federal budget,” Mr Evans said.