The link provides a presentation associated with a webinar we held. The webinar addressed the updated outlook for retail sales and key drivers that could trigger an improvement in spending. In the presentation, we also address the outlook for interest rates, price inflation and population growth. While tax cuts will help sales later in 2024, lower retail price inflation, higher unemployment and a shift of spend to travel and automobiles will all limit the upside in industry sales growth. The presentation also includes insights about retailer profitability, inventory levels, and sales trajectory following results from the 6 months to December 2023.

We have updated our retail sales outlook, with modestly higher forecasts for 2024. We forecast 2.7% growth (up from 2.5% previously). We have lifted our non-food forecasts, but lowered food & liquor forecasts. The prevailing sales trends are very soft but should improve in the back-half of calendar 2024 as income tax cuts flow through. We only see a modest pick up because lower retail price inflation will constrain overall sales growth in FY25e.

Australian retail sales rose by 1.6% year on year in February 2024, adjusted for the leap-year effect. Sales trends are very weak, given population and price are still positive contributors to retail. As a silver lining, retail is now almost back to pre COVID-19 underlying sales trends. Perhaps the mean-reversion is done? The weakest categories in February were furniture, electronics and footwear. Pharmacy, cosmetics and apparel did well. We expect retail sales growth to continue to hover around 0%-2% over the next few months.

The Australian National Accounts for the June 2023 quarter revealed that wages growth remains very strong and, despite a range of headwinds, households still want to spend their money. They continue to tap into stored-up savings to sustain spending habits. Wages grew 9.2%, disposable income only rose 2.1% and consumer spending was up 7.8%. The Australian economy is also benefiting from population growth of 2.4%, which should remain above trend for another 12 months. The headwinds for household will continue and retail spending is likely to remain weak give both a squeeze on living costs and a desire to spend elsewhere outside of retail. This weakness is likely to be most acute in calendar 2023, but we may not see a meaningful improvement in retail sales growth till 2025.