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Deloitte: Christmas cash flow

By Rob Starr, Content Manager,

While it may be a brighter Christmas, it’s likely to be back to the reality of a hard slog for retailers in 2013.  The labour market is weak and there is no immediate fillip to support employment growth (though an expected decline in the $A may help over time).  In the meantime, real wages growth may moderate as inflation picks up further from its recent cyclical lows.  Interest rates are low and possibly heading lower while house prices are showing signs of life, so there are some supports, but perhaps not enough to maintain short-term momentum.

By financial year, real (inflation-adjusted) retail sales growth is expected to record solid growth of 2.9% in 2012-13, a step-up from recent years.  That may then moderate to 2.7% growth in 2013 14 as labour income growth is modest, before improving to 3.6% in 2014-15 as broader economic conditions and housing activity improve.

Australian retail sector outcomes across the country are showing nearly as much diversity as the Eurozone at present.  They range from recessionary retail conditions in Tasmania (where retail sales have fallen by 2.7% over the year to September in real terms), to continued boom conditions in WA (up 8.9% in real terms over the year to September).  That disparity in performance is likely to narrow going into 2013 as lower interest rates support more businesses in the south east, while mining investment levels start to approach a plateau.  But WA and Queensland still remain the best longer term bets for retail sales growth over time.

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