“This summer,Australian households are going to be making some really hard decisions about whether they can afford to turn on their air conditioning,host their family lunch,or even make the trip to visit family for the holidays,” she said.
“Labor’s economic mismanagement and broken promises are leaving Australians to pay the price,and unfortunately,I think it’s going to be a hard Christmas for many households this year.”
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The household spending forecasts set the scene for fierce competition for consumer dollars and a trading period marked by heavy sales promotions and deals to entice shoppers.
ARA chief executive Paul Zahra said price increases and supply chain problems were responsible for the marginal increase in expected spending by households this Christmas.
He predicted shoppers would look for bargains this year as higher living costs make for a more frugal Christmas trading period than in 2022.
“Last year,Christmas spending was bolstered by a record freedom spending phenomenon with delayed overseas travel,whereas this year shoppers are expected to be much more conservative with their budgets,” Zahra said.
KPMG chief economist Brendan Rynne said the ABS figures show people were having to work out how to pay higher petrol prices and were doing so by spending less on takeaway food or spending less on other non-essentials.
“I think households are looking to maximise their spend as best they can and they’re going to be doing that through sale events,and so I fully expect that this upcoming Black Friday sale event is going to be monstrous,” he said.
Rynne said shoppers would look for bargains because their purchasing power has been significantly eroded over the past few years.
“What happened is that there’s now the psyche,in the consumer that this is quite an extraordinary sale event and to get the most benefit from it going into Christmas,” he said.
Australian retailers have been cautious ahead of their major trading period,with several experienced executives pointing to shoppers being stretched. Billionaire Solomon Lew,chairman of Premier Investments which has brands such as Smiggle and Peter Alexander,said last month that cost pressures on consumers were “out of control”.
Festive sales look set to start early this year,with retail giant Amazon launching its first pre-holiday spending event for shoppers in its Prime membership program on October 10.
Commonwealth Bank economist Stephen Wu said the delayed effect of the Reserve Bank’s 4 percentage points in interest rate rises,and the fact hundreds of thousands of households were due to roll off low fixed-rate home loan terms in coming months,would add to household budget pressure ahead of Christmas.
“You certainly expect similar patterns where consumers are primed to take advantage of these sales,” he said.
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Wu said the holiday purchasing forecast from the ARA of 0.1 per cent growth looked worse when inflation and population growth were factored in.
“If you factor in 2.5 per cent population growth and also factor in inflation,about say 3.5 per cent,then you’re really seeing real per-capita spending go backwards,so certainly not a very pleasant picture for retailers,” he said.
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