Retail spending lifts in April, despite end of wage subsidies

Retail spending lifted solidly in April, providing further evidence the end of JobKeeper has not derailed the economic recovery.

How willing Australians are to spend could be the difference between a great post-COVID recovery and a mediocre one. Picture: Monique Harmer

Australians have continued spending in April, with retail turnover climbing by a robust 1.1 per cent in the month – a further sign households have largely breezed past the end of JobKeeper.

The latest figures from the Australian Bureau of Statistics showed total monthly turnover of over $31bn. The annual growth rate jumped to 25 per cent as spending was compared to a year earlier when COVID had triggered a national shutdown of non-essential businesses.

While the year-on-year comparison was flattered by the especially weak starting point, retail trade remained 11 per cent above pre-pandemic levels, showing the step-change higher in spending in the wake of the pandemic remained intact.

[REPORT] Aussie consumers are still keen to spend https://t.co/ThMessVNht#ausbizpic.twitter.com/rOvN6owwBr

— CommSec (@CommSec) May 21, 2021

ANZ economist Adelaide Timbrell said “retail sales are still a higher share of household spending than usual, and we expect this to continue while international travel is unavailable for most Australian residents”.

CBA senior economist Kristina Clifton said based on Friday’s figures and the bank’s own internal data which stretched into early May, “we haven’t seen any kind of decline in the pace of spending”.

“That is another good sign that the economy has coped well with the end of JobKeeper,” Ms Clifton said.

Households accrued an additional $125bn in savings during the pandemic, and Ms Clifton said the pace at which they choose to spend this cash reserve will be a key economic swing factor over the medium term.

Consumption is always a major factor: it accounts for around 60 per cent of the economy. But the size of the cash reserve has supercharged its potential impact.

Earlier this month, the Reserve Bank outlined economic scenarios which in large part modelled a faster or slower pick-up in consumption over the coming two years, and found this could translate into an unemployment rate of 3.75 per cent in the best case at the end of it forecast period, and 5.5 per cent in the worst.

So far, the signs are good, Ms Clifton said. Consumer confidence remains high, and the pace of the labour market recovery has meant Australians are positive about their jobs prospects. The boom in house prices has sharpened affordability concerns, but has provided a further boost to homeowners who now feel wealthier as a result.

One missing component, however, remained a more meaningful pick-up in worker pay, Ms Clifton said.

“It would be disappointing if we didn’t see that lift in wages growth. Pre-COVID we were in a world where wages growth had been soft for a long time, and even though the unemployment was not high, household consumption and retail spending were quite soft.

“We could go back to that world if we don’t see wages inflation pick up.”

Food retailers in particular have enjoyed a lift in custom through the pandemic, with supermarkets and grocers benefiting from, at first, panic buying and hoarding in the initial stages of the health crisis, and then a trend towards eating at home that is slowly reversing.

Food retailing led April’s climb in trade, up 1.5 per cent, the ABS data showed, after two months of declines.

The figures came as Woolworths chief executive said what he was “most anxious” about was consumer confidence, saying it was “pretty good” but that it was “hard to believe it will continue”.

The ABS data showed spending at cafes and restaurants jumped by 2.5 per cent, helped by a dining out voucher scheme in New South Wales.

Economists expect a shift towards spending on services in coming months – much of which is not captured in the retail trade data.