After record consumer spending in March, Australian retail industry associations say interest rate hikes and rising inflation could flatten expenditure in the months ahead.
But economists predict the impact won’t be immediate, given the sizable savings buffer many households accrued through the pandemic.
On Wednesday, the Australian Bureau of Statistics revealed retail spending rose 1.6% in March, setting a new national record.
That seasonally adjusted total of $33.6 billion was warmly welcomed by Australian Retailers Association CEO Paul Zahra, who noted the March total surpassed that of November 2021 and the pre-Christmas rush.
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But shoppers are likely to close their wallets in the months ahead, he says.
“Whilst the top line performance of retail trade is strong, consumer confidence has fallen significantly this week and we could see more subdued levels of consumer spending in the months ahead as people start to tighten their household budgets.”
Dominique Lamb, CEO of the National Retail Association, says proprietors face significant struggles ahead, as “looming increases in interest rates, superannuation and award wages represent a very unwelcome triple whammy for business owners”.
Reflecting on Tuesday’s cash rate hike, Lamb says the record retail figures should not weigh too heavily on the Reserve Bank of Australia’s plans.
“We would be very concerned if the Reserve Bank Board were to use these figures as justification for a further rates hike in June,” she said.
“We think they need to wait and see how yesterday’s increase affects the May retail sales results before they move again.”
As retailers brace for spending to crawl back from those record levels, economists predict shoppers won’t immediately cancel their in-store and online sprees.
In a Wednesday report, ANZ senior economist Adelaide Timbrell said, “many households have very large savings buffers, which has offset the headline spending impacts of increasing cost pressures and falling real wages.”
“We expect household savings buffers and increases in household incomes to offset inflation and early cash rate impacts in the headline retail data,” she added.
While acknowledging the potential for tough times ahead, Zahra added that saving buffers and open borders may counteract some domestic pricing pressures.
“Despite the increased pressure that’s set to be placed on family budgets in the coming months, with further interest rate rises predicted, we’re expecting sales to remain reasonably robust given the high savings rates of Australians throughout the pandemic, and the ongoing potential for domestic tourism spending to flow onto retail for the remainder of the year,” he concluded.