Australia’s Shops See Year-End Spending Boom as Optimism Returns
(Bloomberg) -- Australia’s retailers are preparing for a late-December spending splurge that could fuel the kind of recovery on the year-end wishlist of Reserve Bank of Australia Governor Philip Lowe.
Consumer confidence rose for a fourth straight month in December, climbing to a 10-year high. Lowe said just two months ago that greater confidence was the catalyst needed to prompt households to part with the extra savings they squirreled away during the lockdown.
“It’s a frenzy in here,” said Susie Loudon, owner of The Bay Tree homeware and gift shop on tree-lined Queen Street in the wealthy Sydney suburb of Woollahra. “You can feel it in the street that people are positive and they’re spending.”
A spending bonanza would help keep Australia’s economic momentum going after it emerged from its first recession in almost three decades last quarter. The opening of state borders should aid the ongoing recovery, with the government’s expansionary budget and the central bank’s additional easing package also supporting the upswing in confidence.
Households have piles of cash to spend after the savings ratio surged to series highs during the second quarter from a combination of government stimulus and limited spending options. Closed international borders mean more holiday spending this year will flow into the domestic economy as the emergency savings are unwound.
“People are excited to get together with all the extended family for the first time for the year,” said Loudon, who has owned The Bay Tree for 32 years. “So they are going all out for Christmas and nothing is too much trouble this year.”
The average Australian is expected to spend A$893 ($675) on Christmas this year for a cumulative total of A$17.3 billion, according to a late November survey by Finder.com -- a comparison website -- with greater spending on gifts than the 2019 survey signaled.
Spending was gaining momentum even before the year-end rush. Victoria state, representing a quarter of the economy, emerged from one of the world’s toughest lockdowns in late October. Victorians flocked to shops, cafes and restaurants throughout November as pent-up demand was unleashed.
Analysis from economists at National Australia Bank Ltd, using their Cashless Retail Sales Index, suggests that national retail sales rose 3% in November from the previous month. Separately, new car sales jumped 12.4% last month from a year earlier, data from the Federal Chamber of Automotive Industries showed, the first monthly gain in more than two and half years.
With the recovery continuing, the central bank expects the economy to expand by 5% next year, reaching its pre-pandemic level at end-2021. While Lowe will be pleased with recent developments, he warned a parliamentary panel earlier in December that the recovery will be “uneven and bumpy.”
The contrast with last summer is stark when smoke-filled air in Australia’s largest cities caused by wildfires drove people indoors. This year there’s a clear preference shift toward shopping outdoors and supporting local business.
“People are still conscious of keeping their distance, sanitizing their hands at the front of the store,” Loudon said. “But, putting their hands in their wallets - - you bet they are.”
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