Retail spending flat despite stage 3 tax cuts flowing through economy

Stage 3 tax cuts and wage growth have only marginally lifted retail sales in Australia, sparking this warning.

Stage 3 tax cuts and wage growth have only marginally lifted retail sales in Australia, sparking warnings of a negative GDP quarter for September.

Retail turnover in September rose just 0.1 per cent, according to seasonally adjusted figures released on Thursday by the Australian Bureau of Statistics (ABS).

This comes after growth of 0.7 per cent in August 2024 and a flat result in July 2024 when the tax cuts kicked in.

For the September quarter, retail sales volumes rose 0.5 per cent. This was the first positive quarter for the year following falls of 0.4 per cent for both June and March quarters.

KPMG chief economist Brendan Rynne said Thursday’s figures showed the economy was weak and households were continuing to watch every cent they spent

“This result also raises the prospect of a negative economic outlook for the September quarter, given growth in retail sales volumes has a strong causal link to aggregate household consumption, which represents about 50 per cent of national GDP,” he said.

Preliminary KPMG modelling, including the retail sales volumes data released on Thursday, suggests household consumption for 2024Q3 will show another quarter of negative growth.

Weak consumer spending could lead Australia to its first negative quarter. Picture: NewsWire / Max Mason-Hubers

“It is also likely that the retail sector itself will record another quarter of declining industry gross value added in the September quarter – meaning the sector will have last experienced positive growth in the December quarter 2023,” Mr Rynne said.

Oxford Economics Australia head of macroeconomics Sean Langcake disagreed, saying this was the first green shoot in spending for quite some time despite a weaker result in August compared with September.

“Households’ purchasing power has been supported by steady wage growth and slowing inflation. Moreover, tax cuts from 1 July look to have provided a boost to sales growth,” he said.

“Partial indicators of services spending have also been broadly positive, which suggests household consumption growth will have supported GDP growth in Q3.

“Retail sales volumes increased in the September quarter, which is only the second quarterly increase in the past two years. Sales volumes per capita still edged a little lower, but it does appear as though the entrenched weakness in this measure is abating.”

According to ABS head of business statistics Robert Ewing, the slight uptick follows a strong August.

“After a boost last month from warmer-than-usual weather, retail spending held firm,” he said.

Cafes, restaurants and takeaway food services (0.4 per cent) was the only industry to rise this month.

Aussie shoppers are being careful with their money. Picture: NewsWire / Luis Enrique Ascui

Meanwhile, department store sales, clothing, footwear and personal accessory retailing continued to struggle for the month.

Department stores (-0.5 per cent), clothing, footwear and personal accessory retailing (-0.1 per cent) and food retailing (-0.1 per cent) all had small falls following rises in August.

“The August boost in spending on alcohol was temporary, with a sharp reversal in liquor retailing this month driving the fall in food spending,” Mr Ewing said.

Building approvals

Building approvals rose in September, with the number of dwellings approved up 4.4 per cent to 14,843 following a 3.9 per cent fall in August.

“The rise this month was driven by increases across all dwelling types. Private sector houses reached 9745 approved in September to be at the highest level since August 2022,” ABS head of construction statistics Daniel Rossi said.

“Private dwellings excluding houses rose by 4.7 per cent but remain at subdued levels following a 13.5 per cent fall in August.”

The value of total buildings approved rose 1.4 per cent ($13.61bn) following a 1.1 per cent rise in August.

Dwelling approvals in Queensland, South Australia and Western Australia all grew growth over the month

Western Australia approved 1661 private sector houses, its highest number since May 2021.

Meanwhile, NSW was the worst performing, with total dwellings falling by 14. 8 per cent for September.

Master Builders Australia chief economist Shane Garrett welcomed the strong result but said there was still a long way to go if Australia is to meet its 1.2 million new homes accord.

He pointed out total dwelling approvals were now 6.8 per cent higher than a year ago.

Over the same period, detached house approvals have expanded by 16.3 per cent.

“More action is still needed to bring down the high costs and timelines associated with building to encourage even more people into the new home building market,” he said

“Addressing labour shortages, speeding up planning approvals, ending housing legislative stalemates in the Senate are some examples of how to improve the investment environment in new home building.”