Colin Brinsden, AAP Economics and Business Correspondent
(Australian Associated Press)
The recent buoyancy of consumer confidence has yet to be reflected in retail spending, but income tax cuts and a potential interest rate decrease could lead to a shopping spree in coming months.
At the same time, new figures released on Wednesday also showed there is growing demand to hire workers as the economy opens up from COVID-19 restrictions, and that there are signs the economy is moving out of recession.
Retail spending fell by $448.6 million or 1.5 per cent in September compared to the previous month, the Australian Bureau of Statistics says in its preliminary data.
This followed a four per cent drop in August, but retail trade still remains 5.2 per cent higher than a year earlier.
It is expected to contribute to growth in the September quarter after detracting in the June quarter.
AMP Capital senior economist Diana Mousina is more optimistic about the immediate outlook for retail, particularly as Victoria slowly emerges from its lockdown.
“The income boost from tax cuts, additional welfare payments and potential RBA interest rate cuts will also help the retail sector over the short-term,” she said.
Consumer confidence – a pointer to future household spending – has risen for seven straight weeks, gaining momentum recently following the tax-cutting federal budget.
Financial markets are also fully prepared for a cut in the cash rate to 0.10 per cent from 0.25 per cent when the Reserve Bank of Australia board meets on November 3, following recent comments from central bank officials.
Separately, an indicator of future economic growth suggests Australia is moving out of recession.
The Westpac-Melbourne Institute leading index, which indicates the likely pace of economic activity three to nine months in the future, now stands in line with the average recorded over the 12 months prior to the COVID-19 pandemic.
“Consistent with the steady progression in the leading index, we expect growth of 2.8 per cent in 2021 and 3.5 per cent in 2022,” Westpac chief economist Bill Evans said.
“Key factors behind this stronger profile are a boost to consumer demand, as households spend around 50 per cent of the personal tax cuts, and a lift in business investment in response to the accelerated depreciation allowances.”
Westpac expects that growth in both the September and December quarters of this year will be clearly in positive territory as the Australian economy opens up after the massive seven per cent economic contraction in the June quarter.
There was also positive news for the employment outlook with job advertisements posted on the internet jumping 6.4 per cent in September.
This included a notable 11.9 per cent surge in Victoria after two months of falls during its COVID-19 lockdown, figures released by the Department of Employment show.
All states and territories recorded gains in recruitment activity during the month, while seven of the eight occupational groups monitored by the department also recorded increases.
Job ads were strongest for technicians and trades workers, rising 9.6 per cent in September.