The Outlook for Australian Retail in 2023


Roy Morgan

Uncertainty Ahead as Shoppers Face Mortgage Stress

According to expert analysis from Roy Morgan Research, the forecast for Australian retail in 2023 is one of continuing uncertainty. Cost-of-living pressures and rising interest rates are expected to dampen consumer confidence and discretionary spending.


Here is my summary of the report, you can read it here plus my notes of how I expect it to affect my clients.

Mortgage Stress Reaching 15-Year Highs

  • 29.2% of mortgage holders are now at risk of mortgage stress, up 642,000 in one year.
  • Highest level of mortgage stress since August 2008.
  • Caused by 12 RBA interest rate rises over the past year.

This increase in mortgage stress reduces people's discretionary income to spend on retail goods. As more household budgets are stretched paying the mortgage or rent, retail spending is impacted.

Consumer Confidence Remaining Near Record Lows

  • ANZ-Roy Morgan consumer confidence index below 80 for 27 consecutive weeks.
  • Longest period below 80 since tracking began in 2008.
  • Ongoing uncertainty around further interest rate rises undermines confidence.

Consumers lacking confidence in the economic outlook tend to restrain their spending, providing another problem for Australian retail.

A 'Softening' Rather Than a 'Cliff' for Retail Spending

While these pressures are taking a toll, the feared "spending cliff" has been avoided so far, according to Roy Morgan. Spending volumes and growth have slowed, but this is more of a "softening" and gradual return to trend.

Some factors propping up retail spending include:

  • Strong population growth continuing, increasing demand.
  • Grocery spending remaining steady as food is an essential purchase.

Although not mentioned here in this report, items affecting kids education have not been affected.


Travel Reclaiming Its Share of Wallet

One area clearly impacting discretionary retail spending is travel. After COVID lockdowns, travel demand has roared back.

Roy Morgan data shows travel spending up $30 billion in the year to June 2023 compared to the previous year. As holidays claim more of people's budgets, this leaves less available for clothing, dining out, electronics and other discretionary purchases.

Although not mentioned in this report, the big spending overseas tourist from China are unlikely due to the Chinese economic problems to come to Australia.


Overall Retail Sales Forecast to Decline 1.4% in 2023 After Inflation

While retail spending is expected to grow 2.8% before inflation, Roy Morgan forecasts a 1.4% decline after factoring in 4.1% inflation predicted by the RBA.

This indicates a return to trend after the aberrations of COVID stimulus and reopenings. Before you get upset by this note that retail sales are still 15% above the pre-COVID trend, showing the ground is still made.

Essentials Like Food to Outperform Discretionary Categories

Food retail spending is forecast to grow 4.8% before inflation, and 0.5% after. Consumers still need groceries despite cost of living impacts.

Meanwhile discretionary non-food categories like household goods, clothing and dining out are predicted to decline 2.7% in real terms. These categories surged earlier in reopening so some correction is expected.

The Path Ahead for Australian Retailers

While the retail environment remains challenging, the forecast is for a very modest rather than dramatic downturn. Food and necessity spending shows some resilience, while discretionary categories are pulling back as spending patterns normalise post-pandemic. 

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