Spending spree beckons as Aussies Christmas at home, Credit Suisse predicts

Australians will be throwing a few extra prawns on the barbecue this Christmas, with up to a million extra people in the country due to travel restrictions.

Actor Paul Hogan barbecues prawns at Nambour Civic Centre, reprising his famous 1984 tourism commercial. Picture: Glenn Barnes

There will be plenty more prawns on the BBQ and beer in the fridge for Christmas this year as Australia’s annual international exodus is postponed by flight bans, social isolation and quarantining,

An extra million people are set to remain within the nation’s borders, unable to travel overseas because of the COVID-19 pandemic.

Travel restrictions could swell the nation’s population by as much as 4 per cent, generating a lot more mouths to feed over the festive season and summer holidays, a report from Credit Suisse analyst Grant Saligari predicts.

“The addition to the resident population in Australia is likely to be a significant benefit to domestic retail,’’ Mr Saligari said in his report to clients.

“We highlight food and recreational goods retail as areas likely to benefit disproportionately from a greater level of domestic expenditure.”

Mr Saligari said prior to 2020, the number of resident international trips from Australia had been increasing. In December 2019 there were 500,000 fewer residents in Australia compared with December 2018 because of international travel — a subsequent drag on segments of domestic retail that relied on resident expenditure on items such as food and domestic holidays.

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But that trend has reversed in 2020.

“Assuming Australia’s international travel restrictions remain in place, there is likely to be an additional 1 million Australian residents and long-term visitors remaining in Australia in December 2020 versus 2019,” Mr Saligari said.

“The expected net increase from residents and long-term visitors is equivalent to 4 per cent of the population. Additional stay-at-home population is a significant benefit to domestic retail.

Credit Suisse also expects spending on recreational goods and domestic travel is likely to benefit from domestic holiday and recreational activities.

It estimates Australians travelling internationally for leisure and visiting family and friends in 2019 spent $340 per person per night on average. While residing at home, Australians spend $117 per person per day on average.

Total annual expenditure by Australians on international travel typically equates to 5 per cent of household income or $53bn in the year to June 2019.

Credit Suisse estimates the increase in expenditure in 2020 is likely to be larger than the change in population, with food retail to be a significant beneficiary.

Credit Suisse upgraded forecasts and target prices for Coles from $19.97 to $20.16 a share, Woolworths to $40.43 from $40.31, and Metcash to $3.62 from $3.55.

The analyst retained an outperform rating on Metcash and upgraded Coles to outperform from neutral. A neutral rating was retained on Woolworths, which is largely due to valuation.

“We prefer Coles to Woolworths. In our view, a stronger cost-out program, lower level of capital expenditure, and higher payout ratio should result in absolute appreciation in Coles and outperformance relative to Woolworths,” Mr Saligari said.