Retail spending has posted its worst quarterly performance since the introduction of the GST 20 years ago, and the risks are it could worsen as Victoria locks down in its fight against the coronavirus.
It is another worrying factor for the Reserve Bank board as it hold its monthly meeting on Tuesday, although economists generally expect the central bank to retain the cash rate at a record low 0.25 per cent.
Australian Bureau of Statistics data shows retail spending dropped 3.4 per cent in the June quarter, following a 0.7 per cent rise in the previous three months.
In the month of June, spending was slightly stronger at a rise of 2.7 per cent compared to the bureau’s preliminary result of an increase of 2.4 per cent.
This built on the 16.9 per cent rise in May, which followed a 17.7 per cent slump in April when the pandemic first impacted on the economy.
“The June month saw the continued recovery of industries impacted by trading restrictions in April and early May,” ABS director of quarterly economy wide surveys Ben James said.
“Despite monthly rises in May and June 2020, the June quarter saw the largest fall in seasonally adjusted retail volumes since the introduction of the GST in the September quarter 2000.”
Souring the outlook further, among Victoria’s latest pandemic restrictions the retail sector – outside of supermarkets, grocery stores and bottle shops – will have to close doors and shift to online shopping only.
“Melbourne’s Stage 4 lockdown will put a significant drag on total retail turnover in the near term,” BIS Oxford Economics chief economist Sarah Hunter said.
“The impact is likely to be concentrated in cafes, restaurants and takeaways and clothing, but the much tougher restrictions on which retailers can remain open and sell to the general public will mean that other categories such as household goods could also fall back.”
Unsurprisingly, Australians continue to feel anxious as the COVID-19 pandemic sinks the economic outlook.
The latest ANZ-Roy Morgan weekly consumer confidence index – a pointer to future retail spending – fell for a sixth straight week.
It declined 0.4 per cent, to be at its lowest level since late April.
ANZ head of Australian economics David Plank warned the latest survey for last week does not capture the impact of the extended Melbourne lockdown announced on the weekend.
“Despite the decline seen since the onset of the second wave in Victoria, the severity of the fall has been less than in March – at least so far – suggesting Australians have become somewhat accustomed to the ‘new normal’,” Mr Plank said, releasing the survey on Tuesday.
Consumer confidence collapsed in March when the pandemic first hit Australia’s shores, but then slowly recovered during April and May as its impact initially proved less than feared.
Victorian Premier Daniel Andrews has warned a quarter of a million workers in his state could lose their job as a result of an extended and deeper lockdown in a further attempt to stop the spread of the coronavirus.
The central bank board will need to weigh up the impact of the restrictions in the nation’s second-largest state on the rest of the economy.
The Reserve Bank has been relatively upbeat about a gradual economic recovery.