11/03/2009 - 06:31

Federal support helps ailing retailers

11/03/2009 - 06:31

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The unwinding of the commodity and mining investment boom will take the lustre out of the Western Australian, Northern Territory and Queensland economies over the next few years, according to Access Economics, as the nation's economic backdrop continues t

Federal support helps ailing retailers

The unwinding of the commodity and mining investment boom will take the lustre out of the Western Australian, Northern Territory and Queensland economies over the next few years, according to Access Economics, as the nation's economic backdrop continues to get uglier.

The Access Economics Retail Forecasts released today, shows Australia's retailers had a tough year in 2008 but earned something of a reprieve in December as some of the federal government's initial stimulus package was spent.

That was enough to result in a retail sales rise of 3.8 per cent (in nominal terms) through the month - pretty much the only retail growth registered through all of 2008.

The recent Nation Building package, which provides bonuses totalling $2.7 billion in March, and a further $8.3 billion in the June quarter, will provide some further support, the report said.

"But the economic backdrop continues to get uglier so these measures are likely to only result in real retail spending treading water in the first half of 2009," Access Economics director David Rumbens said.

"Indeed, Access Economics sees little growth in real retail spending being realised until the second half of 2010."

The key economic events yet to unfold in 2009 for retailers are centred on unemployment and house prices.

On the former, there is further bad news in the pipeline with the number of people unemployed expected to increase by 300,000 in 2009, based on federal Treasury's estimates.

"That means a big loss of labour income, and will serve to keep consumers ultra cautious with any spare cash they may have," Mr Rumbens added.

On house prices, average prices fell by 3 per cent in 2008 and a further fall in the order of 5-10 per cent is likely in 2009.

But house prices in the US, UK and many other developed economies have fallen by much more so there is the risk of a notably worse scenario for retailers than the one mapped out here, the report said.

"Either way, retailers face a tough road ahead," Mr Rumbens said.

"Many particularly at the more discretionary end have already started to trim their own workforces. Even if our banking system holds up there are major challenges ahead.

"Global trade has slowed and Australia is only just starting to feel the effects of a big decline in commodity prices."

Access Economics forecasts real (inflation-adjusted) retail sales to grow by just 0.8 per cent 2008-09 and 0.2 per cent in 2009-10. A modest retail sales recovery will take place in 2010-11 assisted by stronger housing activity, with growth of 1.7 per cent expected.

The largest cuts to interest rates in living memory have benefited mortgage belts across the country - however, job losses will temper any flow on effects for retailers.

It is the resource rich states that will bear the brunt of the lost income from the slowdown.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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