The national accounts, which show the economy contracted 0.5 per cent in the December quarter, confirm that Australian shoppers are saving rather than spending, according to the Australian National Retailers Association (ANRA).
“Retail spending was weak in the December quarter. Our appetite for imported consumer goods dropped sharply while household savings soared to their highest level in almost 20 years,” said ANRA CEO Margy Osmond.
Year-on-year the national accounts show cigarette sales dropped 0.9 per cent, alcoholic beverages fell 2.5 per cent and the hotels, cafes and restaurants lost 2.6 per cent. Essential consumer items are less affected.
Food rose 0.6 per cent, clothing and footwear 1.7 per cent and furnishings and household equipment up one per cent.
“To a great extent food is recession proof as people have to eat, and if they’re eating out less they’ll naturally spend more money on their weekly grocery shop,” said Osmond.
Some of this lift in spending will be due to the government’s first stimulus package, which ANRA calculates injected about $1.3 billion into the retail sector over December and January. More cash payments will follow in April.
Households are saving a greater proportion of their income. The household saving ratio more than doubled in the last six months of 2008 to reach its highest level since the last recession.
“Consumers are naturally hesitant to spend. Household debt is three times what it was during the last recession, super funds have taken a battering and home values are stagnating. It’s not surprising that people don’t feel as secure as they used to. Meanwhile, retail inventories fell $820 million.
“The massive drop in retail inventories is a clear sign that retailers are not replacing stock for fear of not being able to move it,” said Osmond.
Since October, ANRA’s surveys of consumer spending intentions have shown a persistent mood to reduce debt and boost savings rather than boost discretionary spending.
“Australia is stuck in a crisis of consumer confidence with the natural reluctance of people to spend at a time of uncertainty compounding the pressures on our economy.”