But the federal government’s promised tax cuts and a new record low interest rate are expected to help struggling retailers in the second half of 2019.
Real retail turnover fell by 0.1 per cent in the March quarter, according to new data released by Deloitte Access Economics on Monday.
The turnover, which indicates how much product a store is moving, grew by a modest 1.1 per cent in the 12 months to March.
The trend comes despite a steady rise in the number of people finding new jobs across the nation, with Deloitte blaming stagnant wage growth and declining wealth.
“This has hurt consumer sentiment and weighed on willingness to spend,” its latest retail forecast report states.
The housing market correction – which has seen prices fall in recent months – has played into people’s declining wealth and weighed on the economy, the report argues.
The pain is unevenly spread across retailers with discretionary spending weakest in department stores and on household goods.
Food was relatively insulated from the household financial pressures, with food retailing and catered food spending having a relatively good start to the year.
Falling prices for clothes also helped spending on apparel edge higher than retailers more broadly.
But Deloitte believes the sector will have more to smile about in the remainder of the year, as the effects of monetary policy and fiscal stimulus combine.
The Reserve Bank last week cut the official interest rate to a low of 1.25 per cent in an effort to get the economy moving, which is expected to give many mortgage holders more cash to play with.
The federal government also plans to legislate its promised tax cuts within weeks, the first round of which will boost a tax offset for low and middle income earners filing their tax returns this year.
In light of these two factors, Deloitte is forecasting retail sales to grow by 1.3 per cent in the September quarter.
Looking at the bigger picture, it is expecting 1.5 per cent growth for 2019, which is down from 2.2 per cent growth in 2018.
But as the benefits of the tax cuts continue to be felt, retail turnover growth is expected to pick up to 2.9 per cent in 2020.
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