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Yes, right now, we’re counting the pennies. But the future is a brighter one, with migrants and tourists back in big numbers and consumers regaining spending power, according to Retail Forecasts, Deloitte Access Economics.
“We’re entering a period where higher interest rates will take a chunk more out of disposable incomes for consumers and increase the proportion of mortgage holders at risk of mortgage stress,” says report author David Rumbens.
“We’re seeing consumers become more value conscious, and saving money by purchasing lower cost alternatives. For example, 27% mostly purchased store brand products, in January 2023, up from 22% in September 2022.
“Non-food sectors are forecast to experience the brunt of the retail slowdown as consumers prioritise non- discretionary items, with real non-food sales expected to see a contraction of around -3.0%, while food retailing should stay afloat with growth of 2.8% over 2023. “
But real wage growth and consumers getting their spending mojo back, population growth, a return of tourists and a pick-up in residential construction will all push the retail sector into a brighter 2024, says Rumbens.
While Australian consumers were resilient through much of 2022, spending has pulled back of late with more households entering mortgage stress.
Housing remains the largest source of inflation, contributing on average around one-third of price growth over the last four quarters.
But, for Australia’s inflation problem, the December 2022 numbers of around 7.8%, may be as bad as it gets, according to the report.
So buckle down and keep working your financial strategy. Relief is in sight.