Perth Christmas spending set to be lower but light is on the horizon
Festive season sales in WA are tipped to fall by 0.5 per cent this year. (ABC News: Hugh Sando)
The next three days are the culmination of Australian retail’s critical period, from mid-November to Christmas Eve, when shoppers are expected to spend $51.48 billion on gifts, food and other items.
- WA retailers will likely receive $29 million less this festive season compared to last year
- It is the only state predicting negative growth in pre-Christmas sales
- Retailers forecast a surge in spending in the new year thanks to rising consumer confidence
But WA retailers will likely receive a smaller share of the pie — $29 million less — than they did last year.
Figures from the Australian Retailers Association (ARA) and Roy Morgan Research show Christmas sales in WA are tipped to fall by 0.5 per cent this year, compared to 2017.
If the forecasts are accurate, WA will be the only state to record a decline in spending over the festive period.
“West Australia has been through a very tough time over the last few years,” ARA executive director Russell Zimmerman said.
“The retail economy depends on confidence and when confidence increases, so too retail spend increases.”
The ARA expects WA shoppers will also spend less in the post-Christmas sales — about $1.9 billion in total, or 0.4 per cent less than in 2017.
Jobless rate, migration are retail headwinds
For many retailers, about 60 per cent of their annual profit is made in the six-week pre-Christmas period and post-Christmas sales, according to the ARA.
In WA, about 30 per cent of the forecast $5.37 billion in sales will be recorded between last weekend and Christmas Eve.
That figure is lower than last year, which analysts say is due to a multitude of economic factors, including low wages growth, high household debt and sluggish population growth.
Earlier this week, the Australian Bureau of Statistics (ABS) revealed WA’s unemployment rate had reached 6.5 per cent — the highest jobless rate in the country — accompanied by a rise in the participation rate.
“There’s more and more people entering the job market and looking for work, and they’re not able to find that work,” Rick Newnham, chief economist at the Chamber of Commerce and Industry (CCI) WA, told the ABC.
At the same time, workers who moved to WA during the mining construction boom are continuing to leave.
“We’ve still got net negative interstate migration, which means that more people are heading east than are arriving here,” Mr Newnham said.
During 2016-17, WA recorded a net loss of 13,934 residents to other states, according to ABS data.
“That has a major drag on the economy,” Mr Newnham said.
“That flows through to retail, it flows through house prices, it flows through dwelling construction.”
Colliers International research and urban economics manager Misha White agreed that the slump in Perth property prices since 2014 has added to the consumer malaise.
“The residential market is still slightly subdued and so there is still some uncertainty in the marketplace, even though there are signs that the economy is actually recovering,” she said.
Consumer confidence a bright spot
For WA, the signs of a nascent economic recovery are mounting, with the State Government expecting to post a surplus for the first time in six years.
While consumer confidence dipped in the December quarter, according to a CCI survey, it remains well above its long-term average, with 82 per cent of respondents expecting the WA economy to remain unchanged or improve over the next quarter.
“Western Australians are generally feeling more optimistic about the future of the economy,” Mr Newnham said.
“That’s still taking time to flow through to their personal finances.”
Retailers say the rise in consumer confidence is likely to be a lead indicator for spending, which is predicted to pick up in the new year.
“People are starting to feel a little bit more confidence in Western Australia,” Mr Zimmerman said.
“If that confidence keeps growing, then I am absolutely certain we’re going to see some great figures into 2019.