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Don't panic, retailers told

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Retailers can stop fretting about the post-budget blues.

While the impact of the federal government’s belt tightening does present a challenge for the retail sector, one prominent forecaster does not expect the budget to prevent another strong year of consumer spending.

Deloitte Access Economics partner David Rumbens estimates households will have around $10 billion less to spend by 2017/18 due to budget measures but describes this as only a modest detraction from retail and other components of consumer spending.

Consumers are currently spending around $23 billion a month at the shops. The hit to income also won’t be really felt until the beginning of the 2015/16 financial year when the $7 co-payment when visiting the doctor and a range of family benefit reductions kick in. At the same time, the Reserve Bank can offset the impact of the budget on incomes by delaying any interest rate rises to 2015 rather than 2014, Rumbens says.

That suggests the budget shouldn’t derail the consumer spending recovery even though consumer confidence has succumbed to post-budget slump.

“On the view that consumers will respond to actual influences on their ability to spend rather than perceived ones, the budget shouldn’t stop 2014/15 from being a strong year for retail,” Rumbens said in his quarterly Retail Forecasts report released today.

He forecasts inflation-adjusted spending to have grown by 3.2 per cent in 2013/14 after 2.2 per cent in the previous financial year and before accelerating to 3.6 per cent in 2014/15. However, retail growth is not expected to be evenly spread. NSW should enjoy 4.8 per cent growth both this financial year and next due to the flow-on impact of the sharp rise in Sydney house prices.

At the other end of the scale, ACT retail sales are expected to be a limp 0.7 per cent growth both this year and next given that it is heavily exposed to public-sector cuts. This has already taken its toll on confidence which has seen Canberra house prices flatline over the past year.

Colin Brinsden is AAP’s Economics Correspondent

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