Retail spending stalls in September as tax cuts banked
Australian retail sales stalled in September, with fresh data suggesting shoppers opted to save, rather than spend, the additional income they received from Labor’s overhauled stage three tax cuts.
National retail sales stalled in September, with fresh data suggesting shoppers opted to save, rather than spend, the additional income they received from Labor’s overhauled stage three tax cuts.
Figures released by the Australian Bureau of Statistics on Thursday showed retail spending rose just 0.1 per cent last month, falling short of economists’ expectations of a 0.3 per cent increase. That followed a one-off spending bump in August of 0.7 per cent as shoppers were driven back to stores for Father’s Day and an unseasonably warm end to winter.
Compared with a year earlier, retail sales rose by 2.3 per cent to $36.5bn, the seasonally adjusted figures show, as household consumption is supported by easing inflation, steady wage growth and government assistance.
The Reserve Bank has been alert to the risk that Labor’s overhauled tax cuts could give rise to an increase in consumer spending and consequently exacerbate inflationary pressures. However, the latest figures suggest the extra income has been slow to translate to higher spending.
“The data does not suggest a material uplift in consumer spending arising from the stage three tax cuts,” Commonwealth Bank economist Stephen Wu said on Thursday.
However, the weaker-than-expected figures are unlikely to bolster the chances of interest rate relief after data on Wednesday showed underlying inflationary pressures remained persistent and above the RBA’s 2 to 3 per cent target band.
Markets are fully priced for a quarter point rate cut at the central bank’s May board meeting.
The ABS figures also show spending growth during September was mixed across retail industries. After falling 0.4 per cent in August, spending on household goods climbed 0.5 per cent last month. Spending at cafes, restaurants and on takeaway meals also increased by 0.4 per cent.
However, spending on clothes, footwear and personal accessories, and across food retailing, fell 0.1 per cent. Department stores posted the largest decline in turnover, down 0.5 per cent. And spending growth across the bureau’s “other retailing” category – which includes cosmetics, pharmaceuticals, sports and recreation goods – was flat.
AMP economist My Bui said still-strong population growth, running at 2.1 per cent in the 12 months to September, remained one of the major drivers of retail sales growth. “While nominal retail growth is still up … spending per capita continues to be negative. This is the longest and deepest retail per-capita recession in the history of the series,” she said.
The lacklustre spending figures come after retailers warned of moribund Christmas trading conditions, with consumers expected to continue squirrelling away the tax cuts, rather than embarking on a festive spending spree this year.
“This remains one of retail’s most challenging years, with a continued slowdown in discretionary spend, high business costs along with ongoing challenges such as retail crime, supply chain disruptions, and the most significant workplace relations reforms in decades,” Australian Retailers Association chief executive Paul Zahra said.
On Wednesday, supermarket giant Woolworths warned that its first-half earnings would suffer as cost conscious shoppers opted for specials and cheaper products.
While not issuing a profit warning, Coles on Thursday posted first quarter sales growth of 2.9 per cent, lagging Woolworths’ 4.5 per cent rise.
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