Steady growth ahead for Australia’s retail spending

The country is not expected to return to another strict lockdown.

The retail spending trajectory in Australia for 2022 is on a steady growth path despite continuing consumer wariness, as the country is unlikely to return to another strict lockdown, according to a report from Fitch Solutions.

Australia’s consumer confidence has been gradually falling from the 10-year high of 118.8 in April 2021. But retail sales figures lagged consumer confidence reporting, with YoY growth returning to positive growth in September 2021 at 1.7%, and in January 2022 at 6.4%.

While 2020 base effects are still impacting growth, the Christmas and New Year holiday period was helpful in boosting retail sales figures, the report stated.

“Furthermore, as of March 7 2022, with 79.6% of the population in Australia fully vaccinated against COVID-19, it is unlikely the country will return to another strict lockdown. As such, the retail spending trajectory for 2022 is on a steady growth path,” Fitch added.

However, the drop in consumer confidence in February indicates ongoing consumer wariness from the elevated COVID-19 infections, which is beginning to rise again in March. This may fuel consumer reticence to go to crowded areas like shopping malls, Fitch said.

Based on Google Mobility data, foot traffic to non-essential retail has largely been trending below pre-pandemic numbers since movement restriction orders were issued. In contrast, foot traffic to essential retail operations has been performing better.

Fitch attributed this largely to the fact that essential shopping was never restricted in Australia throughout the various periods of lockdowns, and consumers were allowed to visit supermarkets and grocery stores for essential food and drink shopping.

“In contrast, other retail outlets such as clothing and electronic stores were not allowed to operate as they were not classified as essential services,” the report stated.

Meanwhile, e-commerce became one of the most effective channels that consumers can obtain their non-essential items following multiple lockdowns, but Fitch noted there has been a general uptrend for online retail even before lockdowns.

Based on Google Mobility and online retail sales data, Fitch noted that the bulk of the online retail sales may have come from the non-essential retail channels.

Nonetheless, online sales of essential products have also grown, according to the report. Total online retail sales for food products doubled between 2019 to 2021 despite supermarkets remaining open throughout the various phases of lockdowns in Australia.

“Whilst non-essential retail businesses largely benefited from the shift to e-commerce during the pandemic, essential retail businesses have also adapted to Australian consumers' preference for shopping online,” the report stated.