(Australian Associated Press)
Australians have been propping up the retail sector by living beyond their means, but a new report suggests “that ship has now sailed”.
Deloitte Access Economics partner David Rumbens said in a report released on Wednesday that consumers have maintained spending because of housing market windfalls and the rise of buy now, pay later services such as Afterpay.
Overall consumer spending over the past five years has increased by 2.5 per cent a year, while disposable income as increased just 1.9 per cent a year.
“That difference is a fair chunk of change, and it’s fair to say that many retailers have only survived the last few years because we’ve lived beyond our means,” Mr Rumbens said.
“But that ship has now sailed.”
Housing gains have dried up and there are questions about the share market, he said.
Wages are up but not enough to avoid damage to the retail sector, and people will likely be prudent with their cash.
“That leaves 2019 as retail’s gap year – nursing a hangover before getting ready to move ahead in a year’s time,” he said.
Deloitte Access Economics’ Retail Forecasts report expects real retail turnover growth to slip to 1.6 per cent in 2019, from 2.2 per cent last year.
Mr Rumbens said retailers need to spend the year focused not just on survival, but on strengthening connections with customers and streamlining operations so they can take advantage when the market turns.
He expects retail sales to pick up in 2020 as the housing market stabilises.
The 2.2 per cent growth predicted would be driven in a rise in wages, Deloitte forecasts.
If the new federal government elects to give out straight cash handouts to boost the economy, as it did in 2009 under then-Prime Minister Kevin Rudd, that would “no doubt be gratefully received by the sector,” Mr Rumbens said.