Australia / Analyst Insights
Retail Therapy: Income Support Schemes Keep Consumers Spending

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by William Chapman
Jul 24 2020

Retail spending in Australia has remained largely resilient through the COVID-19 pandemic, supported by the Federal Government’s stimulus and income support measures. According to the ABS, retail turnover rose by 2.4% in June 2020 compared with the previous month as relaxed restrictions across most of Australia encouraged greater retail spending at a range of outlets. This result follows a 16.3% increase in May and a 17.9% drop in April. Notable performers in the retail sector in June include:

The Federal Government’s JobKeeper wage subsidy program and coronavirus supplement to the JobSeeker unemployment payment have supported consumer spending through the economic shockwaves caused by the COVID-19 pandemic. Despite a rise in unemployment and negative consumer sentiment, these programs have largely maintained or, in some cases, increased household incomes, bolstering retail spending. As state governments have gradually relaxed restrictions on movement and gatherings, this spending has flowed through to a greater range of businesses. Nevertheless, the reimposed restrictions in Melbourne are expected to negatively affect total retail spending in July and August 2020.

Restrictions on movement and gatherings initially boosted revenue for firms in the Supermarkets and Grocery Stores industry, and the Hardware and Building Supplies Retailing industry in March and April as individuals spent more time at home. The gradual lifting of these restrictions across most of Australia has enabled more retail businesses to benefit from these stimulus measures in subsequent months, in spite of contractionary conditions in the broader economy. In particular, small and medium sized retailers are anticipated to benefit from relaxed restrictions, as many of these businesses do not have the brand recognition and sophisticated online operations of their larger competitors.

Firms in the Clothing Retailing, Footwear Retailing and Personal Accessory Retailing industries have notably benefited from sustained discretionary spending since restrictions were eased in May 2020. Without government stimulus and income support measures, these industries would likely have recorded sharp falls in revenue since March, as declining incomes generally lead consumers to reduce nonessential expenditure. Resilient consumer spending has also supported participation and employment across these industries, bolstering the economy and establishing a higher base for future recovery.

Recently announced changes to both the JobKeeper scheme and the JobSeeker payment reflect the Federal Government’s projections for economic performance through the end of 2020 and beyond. The JobKeeper subsidy will decrease in value after September 2020 for requalifying businesses, with part-time workers placed on a lower payment. The coronavirus supplement to the JobSeeker payment will fall from $550 per fortnight to $250 per fortnight after September. While part-time workers will also be eligible to access both JobKeeper and JobSeeker payments, limiting the decline in income, unemployed workers face a significant decline in income. Should the unemployment rate remain high from September and beyond, the lower rate of income support will likely place downward pressure on consumer spending and, consequently, economic growth.

IBISWorld reports mentioned in this release:

Clothing Retailing in Australia
Footwear Retailing in Australia
Personal Accessory Retailing in Australia 
Supermarkets and Grocery Stores in Australia
Hardware and Building Supplies Retailing in Australia
Department Stores in Australia
Houseware Retailing in Australia