Retail spending to drive economic recovery

March's rise in retail figures was stronger than the one per cent increase expected by economists.
March's rise in retail figures was stronger than the one per cent increase expected by economists.

Retail spending looks set to be the backbone of Australia's economic recovery this year, although one industry group believes it is still reliant on a successful COVID-19 vaccine rollout.

New figures showed retail spending jumped 1.4 per cent in March, led by gains in Victoria and Western Australia after their COVID-19 lockdowns impacted sales the previous month.

March's rise in the Australian Bureau of Statistics preliminary retail figures for the month was stronger than the one per cent increase expected by economists and followed a 0.8 per cent fall the previous month.

Retail turnover was 2.3 per cent higher than a year earlier.

Australian Retailers Association CEO Paul Zahra said the performance of retailing is underpinning Australia's economic recovery.

"The retail industry has been resilient throughout COVID, navigating its way through state-imposed lockdowns and restrictions," Mr Zahra said.

"Despite all the challenges that have been thrown at them, many of these businesses are helping drive Australia's economic recovery."

But he said the vaccination rollout is now imperative to boosting consumer confidence and safety.

In March, retail spending grew by four per cent in Victoria and 5.5 per cent in WA, rebounding from their February lockdowns.

In contrast, Queensland saw a minor fall reflecting the three-day lockdown in Greater Brisbane at the end of March.

The strength of retailing comes at a time of fairly upbeat consumer confidence.

Backing such confidence was the latest Westpac-Melbourne Institute leading index, which continues to point to solid economic growth above the long-term annual trend rate of around 2.8 per cent over the next three to nine months.

Westpac chief economist Bill Evans is predicting a growth rate of 4.5 per cent in 2021 and largely driven by consumer demand, which is expected to contribute three of those percentage points.

"The reopening of the economy, cashed up households and an 11-year high in consumer sentiment all point to strong spending," Mr Evans said.

There was also further positive news on the employment outlook and a sign that the economy may absorb any job losses that have resulted from the end of the JobKeeper wage subsidy.

The National Skills Commission's final report on vacancies in March confirmed job advertisements posted on the internet soared by 19.1 per cent to a 12-year high.

This was the 11th consecutive monthly increase in job ads and a staggering 96.4 per cent increase above the level recorded in March 2020, the first month restrictions were introduced because of the COVID-19 pandemic.

Job ads rose across all eight occupational groups monitored by the commission during the month.

Fewer businesses are concerned about the end of JobKeeper than they were six months ago.

KPMG's pre-budget survey of 100 medium-sized business found only a third of firms now expect last month's demise of this key support measure during the pandemic will lead to a significant decline in economic activity.

That compared with two-thirds of respondents who were polled prior to last year's October federal budget.

KPMG's Clive Bird said it was heartening to see businesses were feeling upbeat and less fearful of JobKeeper ending.

"Many have accessed government support schemes over the past year and are now emerging with confidence," Mr Bird said.

Australian Associated Press