Report reveals surprise windfall for Aussie retailers but experts warn of grim outlook as inflation bites

Shocking figures have revealed that Australian retail sales came out of the pandemic “better off than if it had never happened”, with a 1.2 percent gain in total turnover for the March 2022 quarter.

But economic experts have warned that inflation could “put the brakes” on overall spending in the second half of this year as retailers face a shift to value purchases, margin squeezes, and rising business costs.

According to the latest retail forecast report from Deloitte Access Economics, retail spending is roughly 6.2 percent ahead of its pre-Covid trends – the spending expected if “Covid disruptions had not occurred”.

The report found this was boosted by the 1.2 percent gain in total turnover and retail spending surging at the end of 2021.

Camera IconRetail spending surged at the end of 2021, followed by a further 1.2 percent gain at the end of the March 2022 quarter. NCA NewsWire/Bianca De Marchi Credit: News Corp Australia

Further sales growth is expected for clothing, restaurants, and department stores to drive another 5.5 percent growth.

Deloitte Access Economics partner David Rumbens said the growth outlook was “positive,” but inflation was now a “cold hard reality” for many retailers and households.

“The price pinch is near unavoidable, with CPI price growth for non-discretionary goods and services up 6.6 percent, more than double that of discretionary, which was up 2.7 percent,” he said.


Mr. Rumbens said households were less likely to reduce their consumption of these non-discretionary goods, such as food and fuel.

He warned this would place “significant pressure” on other spending components.

Retail price growth is forecast to peak at 5.5 percent by December.

Over the same period, food prices are predicted to increase by 7.6 percent.

Camera IconWhile, the growth outlook for retail, is positive, Deloitte has warned inflation could “put the brakes” on overall spending for the rest of the year. NCA NewsWire / Luis Enrique Ascui Credit: News Corp Australia

Mr. Rumbens warned the majority of retail turnover for the rest of the year and into 2023 and 2024 would be driven by prices rather than sales volume.

“Retail sales volume growth may average only 1.1% over 2023 to 2025, compared to 1.9% per annum for retail price growth,” he said.

Camera IconDavid Rumbens from Deloitte Access Economics. Credit: News Corp Australia

Mr. Rumbens said businesses might need to consider lowering costs and avoiding losing competitiveness, such as diversifying and building resilient supply chains.

In their outlook report, Deloitte found the hospitality sector had “fully recovered” as spending on catered food surged close to $12.5 billion in the March quarter.

Spending rose another 8.3 percent, compared to another 18.3 percent increase in December 2021.

Total turnover in department stores was 8 percent higher than pre-Covid levels, but the cost of living constraints meant the sector was “unlikely to see their recent spectacular run continue”.

“The worst may still be yet to come with elevated producer prices still flowing through to retailers and concerns that price growth expectations will become embedded,” the report stated.

Bella E. McMahon
I am a freelance writer who started blogging in college. I am fascinated by human nature, politics, culture, technology, and pop culture. In addition to my writing, I enjoy exploring new places, trying out new things, and engaging in conversations with new people. Some of my favorite hobbies are reading, playing music, making crafts, writing, traveling, and spending time with my family.