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Retail has won a greater share of the consumer wallet in 2020-21 with Deloitte Access Economics forecasting the highest sales rise in a decade this financial year at a hefty 5.9 per cent, but growth will likely be more modest in FY21.
While the pandemic and government stimulus supported a surge in retail spending from consumers who had little else to do last year, further growth from here will depend on people digging into their savings and they way they spend may be quite different.
Following the publication of Deloitte Access Economics' quarterly Retail Forecasts report, author and partner David Rumbens highlighted a bumper FY20 for retailers, but the expectation is now that different sectors will battle it out and anything linked to in-person, social interaction will have a competitive edge.
"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," he says.
"But the next shift in consumer spending is also underway.
"Australian consumers have more options for spending with the easing of restrictions and a need for social contact is supporting eating out and other activities at the expense of other retail spending," he says, with the report highlighting non-food industries will experience the greatest slowdown, particularly apparel and households goods retailing.
Rumbens explains the March data already shows this shift with retail sales volumes falling 0.5 per cent over the previous quarter, even though they were up 4.7 per cent year-over-year.
"Household budgets in 2020 benefitted from substantial fiscal stimulus, but this tap is being turned of," he says.
"An astonishing 5.5 per cent real spending growth in 2021-22 is needed to meet budget expectations, despite little offered for household income.
"Luckily the war chest of savings built up for many over the past six months is starting to be drawn down, providing some buffer for household spending. These savings will certainly play a pivotal role in supporting spending going forward."
He says the hit to disposable income, limited population growth and the ongoing vaccine rollout place some risks for growth forecasts, while Victoria's recent lockdown shows 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," he says.
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