Population 'a challenge for retail'

Government projections show people are coming here, ready or not.

Craig Warhurst

RETAILERS have reason to be optimistic, but slower population growth will pose a more challenging time than in the past decade, an independent forecaster says.

Access Economics says the move towards a "smaller target" for Australia's population - a feature during the election campaign from both sides of politics - means slower sales growth for retailers.

It said, in its latest quarterly Retail Forecasts report, that population growth has explained more than half of the retail sales growth seen since 2005.

"All up, slower population growth in the next decade will make it a much more challenging time for retail than the past decade was," Access director David Rumbens said releasing the report on Wednesday.

Still, he said the creation of some 350,000 additional jobs over the past year is a "tremendous springboard" to produce a period of stronger retail growth over the next year.

Access expects real, or inflation-adjusted, retail sales to grow by a solid 3.2 per cent in 2010/11 after 2.5 per cent in 2009/10.

In 2011/12, it expects sales to grow further by 3.7 per cent during what it expects to be the peak of the next housing construction upswing.

Mr Rumbens said official retail spending data had shown five consecutive months of growth, a run which was last achieved in December 2007.

He said the recovery from the global financial crisis has been a difficult one for many retailers, but it is now more than a year since massive cash handouts were provided.

"With interest rates back in the 'normal' range, retailers can be somewhat optimistic about the future," he said.

However, the key wildcard for the Australian economy remains China, and the timing of any slowdown.

"Closer to home, the retail sector would also be wary of developments in housing construction, which are turning out to be not as strong as hoped," he said.

"Further rises in interest rates will also need to be absorbed."

Retail sales growth in southeast Australia has generally held up better than elsewhere in the country.

Victoria, NSW, South Australia and the ACT are all showing some strength in retail spending on the back of job gains but, Mr Rumbens said, these states also needed to wary about the damage further interest rate rises might do.

The volatile Northern Territory sector is once again showing good gains, but while Western Australia appeared to be recovering, sales did stumble in the June quarter with the mining tax debate driving consumers away from the shops, he said.

Two areas where sales have fallen over the past year are Tasmania - where unemployment has been rising, not falling - and Queensland, due to its struggling housing and non-residential building sectors.