Retailers will face a heightened level of competition for consumer spending as restrictions ease. That’s according to Deloitte Access Economics which in June predicted strong growth for consumer spending over the 2021-22 period once there is a lift in confidence with households drawing down on savings.
Australian retail spending has surged through most of 2020-21 benefiting from captured consumers who had little else to spend on through the pandemic. However, those retailers who profited from a restricted economy are likely to face headwinds in this new financial year suggests Deloitte.
According to the firm’s latest quarterly Retail Forecasts subscriber report (Q2 2021):
- Retail spending was quite soft from January to March, with volumes falling 0.5 per cent over the quarter
- The retail spending forecast for 2021-22 growth is a modest 0.9 per cent gain
- Non-food industries will likely experience the greatest slowdown in retail spending into 2021-22, especially apparel and household goods retailing
- The strong outlook for spending relies on households drawing on any war chest of savings as fiscal stimulus measures unwind and income growth remains muted.
Deloitte Access Economics partner, and Retail Forecasts principal author, David Rumbens, said at the time of publication, “Australian retailers are set to record a bumper year in 2020-21. Spending options have been limited, and with many households having cash to burn, consumers flocked to retail. This has supported what is likely to be the strongest gain in retail spending in a decade.”
The report, published in June 2021 before the current lockdowns, reflected the beginnings of a shift in spending as restrictions eased.
However David Rumbens wisely pointed out “We are not necessarily snapping back to an open society. With international borders still closed for another year, and city-wide lockdowns still happening, overall, retailers can expect sales to remain well above pre-Covid levels, despite a slowdown in spending growth over 2021-22.
“The signs so far are that consumers are willing and able to play their part in Australia’s economic recovery, but the hit to disposable income, limited population growth and the ongoing vaccine rollout place some risks on that growth for 2021-22.”