Australia’s retail sales slowdown looks like it’s becoming entrenched

  • Growth in Australian retail sales slowed sharply in the September quarter following a surprisingly strong run between April to June.
  • The NAB’s cashless retail sales index suggests the recent trends continued in October.
  • Spending levels in NSW have slowed sharply, hinting that falling property prices may be starting to weigh on consumers. However, spending still remains firm in Victoria.

Growth in Australian retail sales slowed sharply in the September quarter.

Based on the National Australia Bank’s (NAB) cashless retail sales index, it looks like those trends continued into October.

“The NAB Cashless Retail Sales Index was up in October, recording 0.8% month-on-month growth,” said Alan Oster, Chief Economist at the NAB.

“However, our mapping of the official ABS measure points to continued weakness — we see the ABS measure gaining 0.2% in October, unchanged from the September print.”


The NAB index uses personal transaction data from the bank’s payment platforms, including spending using debit and credit cards, BPAY and Paypal. The bank says it is “reasonably assumed to be representative of aggregate non-cash retail sales in Australia given its large sample size”.

So what the bank saw go through its electronic payment systems in October points to another weak official retail sales report from the ABS.

Hinting that the downturn in the housing market may be starting to have an impact on spending levels, Oster said there has been a pronounced slowdown in spending growth in New South Wales, where property prices have fallen the fastest this year.

“Our monthly data shows that New South Wales has gone from being the fastest growing state in March this year to the slowest in September and October,” he said.


However, spending in Victoria — where home prices have only fallen slightly slower than in New South Wales this year — spending levels continue to remain firm, making it hard to determine what impact, if any, a reduced wealth effect from lower property prices is having on consumer spending.

While that remains unclear to this point, Oster says this remains his chief concern for the economy in the period ahead.

“Our main concern for the Australian economy remains weak consumption growth which is likely to weigh on broader economic growth given it accounts for over half of all economic activity,” he says.

“With an already low savings rate, weak wage growth, high debt levels and some anxiety from slower growth in household wealth, we see a very cautious household sector over the next couple of years.”

The Reserve Bank of Australia (RBA) seems relaxed about the outlook for household spending, forecasting that it will continue to grow around 3% per annum, helping to underpin its view the broader economy will continue to expand at an annual pace of over 3% in the coming years.

Australia’s October retail sales report will be released on Thursday, December 6.