The Dwindling Retail Sector
The retail market hasn’t been fairing well since the 2008 Financial Crisis. Chris Zappone, economic columnist for the Sydney Morning Herald, reports that 2011 retail sales in Australia have had the weakest annual growth in 27 years. Many financial analysts attribute this drop to consumers being in favour of saving and paying down debt rather than spending.
Annual retail sales only grew 2.4 per cent in 2011. This has been the weakest increase in Australian retail since 1984.
Besa Deda, chief economist of the Bank of Melbourne, gives insight on the bleak situation:
‘‘The lethal mix of consumer caution, rise of online spending, worsening global economic conditions and weather woes led to a slump in retailing not witnessed since the 1980s.’’
December, the most crucial retail month of the year, saw a 0.1 per cent fall in growth. This was shocking, as Christmas was the season of spending in the retail market. These figure did not only disturb manages and employers but also many financial Analysts who were expecting 0.2 per cent rise for the month.
A weak Christmas sale bundled with a generation of weakening annual growth, has pushed the case for a rate cut at a Reserve Bank of Australia (RBA) meeting. The idea is that low interest rates would give consumers confidence to loosen their grip on their money and spend a little more in the coming year.
Bob Cunneen, AMP’s Senior Economist, said "It definitely favours another rate cut by the RBA. The RBA should be able to see consumers are very subdued, which partly reflects global concerns such as Europe but also reflects (the fact that the) labour market is softening here".
