Australian Retailers to Face A Gloomy Second Half of 2022

Australian Retailers to Face A Gloomy Second Half of 2022
People shop at a market in a suburb of western Sydney, Australia, on April 27, 2022. (Saeed Khan/AFP via Getty Images)
Alfred Bui
6/20/2022
Updated:
6/20/2022

Economists have predicted that Australian retailers will see their sales slowing down in the second half of 2022 as consumers are reducing their spending due to living cost pressures and interest rate hikes.

In its latest quarterly retail forecasts report, Deloitte Access Economics said it was likely that most of the growth in retail revenue would be due to prices rather than volumes in the next few years.

The report predicted that retail turnover growth would drop from 3.4 percent in 2022-2023 to 0.8 percent in 2023-2024 before bouncing back to 1.2 percent and 1.8 percent in the following two financial years.

In addition, Australian households were expected to slash spending on non-discretionary goods and services like fuel, housing and health. This would add more pressure to other spending categories.

Nevertheless, Deloitte Access Economics partner David Rumbens said it was somewhat encouraging for businesses in the sector to see lower shipping costs at certain points in time.

“For now, though, businesses may need to look to ways to lower costs and reduce disruptions to operations to avoid losing competitiveness,” Rumbens said.

To achieve this goal, firms have to diversify their production and establish more robust supply chains.

“With wage pressures high, businesses may need to maximise staff retention as much as possible through investment in the likes of training, talent pipelines and automation,” he said.

A woman shops at a market in a suburb of western Sydney, Australia, on April 27, 2022. (Saeed Khan/AFP via Getty Images)
A woman shops at a market in a suburb of western Sydney, Australia, on April 27, 2022. (Saeed Khan/AFP via Getty Images)

Piecing everything together, Rumbens said retail performance in the remaining of 2022 would trend down in the face of inflating living costs, higher interest rates and preference for spending on services.

Furthermore, he said the above forecast might lead to lower retail spending in 2023 and 2024.

“That means the speed of return of net migration will become a significant driver of retail’s future growth prospects,” he said.

Recently, a report from the Australian Competition and Consumer Commission has shown that daily average petrol prices across the five largest Australian cities fell by around 42 cents (29 U.S. cents) per litre between March 29 and April 19, following the fuel excise cut implemented by the former Coalition government.

Nevertheless, this relief was short-lived as petrol prices jumped to above $2 per litre (US$5.26 per gallon) due to global oil pressures caused by the Russia-Ukraine war.

According to the Australian Institute of Petroleum, national average retail petrol prices increased 3.3 percent to $2.05 per litre in the week ending June 19.

Among the capital cities, Melbourne’s petrol prices were the highest at $2.13, while Sydney experienced the most significant price growth at 13.8 percent.

Alfred Bui is an Australian reporter based in Melbourne and focuses on local and business news. He is a former small business owner and has two master’s degrees in business and business law. Contact him at [email protected].
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