Australian retail sector set for another 15 months of tough times, KPMG expects

Battered consumers are unlikely to reopen their wallets until September next year despite cost-of-living relief in the Federal Budget, wages growth finally overtaking inflation and interest rate cuts expected by at least the start of next year.

That’s the prognosis from KPMG in its latest assessment of the health of the retail sector, with immigration no longer boosting discretionary spending.

KPMG estimates spending by established households is down between 6 per cent and 7 per cent year-on-year. It does not expect the sector to be in a positive position until September 2025.

Head of retail and consumer James Stewart said last week’s minimum wage decision by the Fair Work Commission was likely to push pressure back onto retailers.

“The flow-on effects to award wages will mean the retail sector will be impacted at a time where sales are slow and half-year results for major retailers have been soft,” he said.

The data comes as National Australia Bank reported business confidence had fallen back into negative territory and as many analysts and Treasurer Jim Chalmers expect economic growth to be stagnant at best in the June quarter.

Mr Stewart said some State and Federal Budget cost-of-living measures may provide a short-term lift for retailers and consumers.

“Cost-of-living relief measures including the stage three tax cuts and $300 electricity will create some household spending breathing room and ultimately provide some confidence to both consumers and retailers,” he said.

Retail turnover according to the Australian Bureau of Statistics has been broadly flat for just over a year and a slight lift in April was not enough to cover the dip recorded in March.

“It’s no surprise that retailers have been suffering at the hands of low levels of consumer confidence but, until now, high immigration levels had been papering over the cracks,” Mr Stewart said.