Western Australia has recorded the largest drop in retail sales in December compared to other states and territories, according to the latest monthly retail turnover data released by the Australian Bureau of Statistics.
Western Australia has recorded the largest drop in retail sales in December compared to other states and territories, according to the latest monthly retail turnover data released by the Australian Bureau of Statistics.
Retail turnover fell across all jurisdictions, but WA ranks first on seasonally adjusted measures with a 4.71 per cent drop over the month to December 2022.
This was slightly more than Victoria (4.69 per cent) and at least 0.8 percentage points more than any other state.
This is consistent with the latest inflation figures for WA, which showed consumer prices rising by 8.3 per cent over the year to December: a rate of inflation topped only by South Australia.
The December drop in the state’s retail sales marked the biggest fall since April 2020, and the first since the Reserve Bank of Australia started to hike the cash rate from the 0.1 per cent base in May 2022.
The ABS release includes breakdowns in turnover at the national level by category of retail and show the largest falls in monthly retail turnover were recorded for department stores (down by 14.3 per cent) followed by clothing, footwear and personal accessory retailing (down 13.1 per cent) and household goods (down 7.8 per cent).
Meanwhile, food retail sales show a 0.3 per cent increase in December, and there was no change in retail turnover in cafes, restaurants and takeaway food serves.
The falls in December’s retail turnover figures were partly driven by the record-breaking Black Friday and Cyber Monday sales in November, with consumers getting their shopping in early ahead of the typical Christmas spending period.
However, the drop in WA’s retail turnover for the month to December 2022 is more than twice the 1.9 per cent fall that occurred over the same period in the previous year.
These new numbers suggest households are starting to adjust their spending away from discretionary retail items because of rising consumer prices and substantially higher mortgage costs.
The decline in consumer spending is expected to continue in 2023, given the likelihood that the RBA will further increase the cash rate following the increased inflation in the December quarter.
But there is a fair degree of uncertainty among commentators about where the cash rate will end up in 2023.
CommBank has pitched in with a single rate rise of a quarter of a percentage point in February, taking the cash rate to 3.35 per cent.
ANZ and Westpac both forecast the cash rate to rise to 3.85 per cent by May, while Deustche Bank has ventured an unlikely 4.1 per cent by August after four rate hikes in 2023.
Should this occur, we can expect further weakening of demand in WA’s economy and increased strain on household budgets.
This is likely to be the case especially for mortgage holders, with many fixed mortgage loans contracted during the low-interest period due to expire this year.
Household consumption has been a cornerstone of WA’s economic resilience since the start of the COVID-19 pandemic, but these latest retail figures represent something of a warning shot across the bow of the state’s economy.
Cost-of-living pressures and higher interest rates may now be taking their toll and could foreshadow a more cautious outlook for the WA economy.
- Dr Abebe Hailemariam is a research fellow at the Bankwest Curtin Economics Centre
