Australia | Sep 29 2006
By Chris Shaw
Despite higher interest rates and soaring fuel prices for much of the first half of the year ANZ Bank notes Australia’s retail sector has actually held up quiet well, with retail trade recording an increase of 6.2% for the year to July.
The bank expects this solid performance to continue, forecasting an increase of 5.9% for the calendar year before slowing to 5.3% next year. It points to the increase as being the result of higher disposable incomes, which in turn are a reflection of Australia’s solid employment performance. It estimates there have been more than 170,000 new jobs created since April and well over 200,000 since August last year.
Also helping were the tax cuts contained in the budget, as well as a 4% increase in wages nationally. The combined impact has been enough to offset the effects of the increase in interest rates in May and the loss of disposable income from higher fuel prices. The impacts from both are significant, the bank estimating higher interest rates add $2.25bn to household interest payments while the more than 20% increase in fuel prices adds $4.6bn to bills if volumes are steady.
This has not been the case though as consumers have adjusted by reducing their fuel consumption, though an increase is likely in coming months given the recent pullback in the oil price. Whether this is enough to offset the impact from the August rate hike remains uncertain though, the bank pointing out the full impact of the latest rise won’t be known until the September data are available.
As with most other economic indicators the bank notes there has been a divergence in the retail performance state by state, with Western Australia and the Northern Territory leading the way, while Queensland and Tasmania have lagged somewhat.
Various retail sectors have also recorded mixed results, with the bank not expecting household goods retail to show signs of a recovery before the second half of 2007, in contrast to its expectation of solid ongoing performance from food retailers and department stores.
In real terms clothing and hospitality retailing are expected to find the going a little tougher next year, while recreational retailers can expect more favourable conditions based on the bank’s forecasts.