Retail sales growth and retail price growth forecast for 2014 financial year
Retail sales growth and retail price growth forecast for 2014 financial year Claudia Baxter

Retail forecast positive with 'pre-GFC like' sales growth

AUSTRALIAN retail spending has continued with solid gains through 2014 at levels not seen since before the global financial crisis, according to the Deloitte Access Economics most recent retail forecast.

Report author David Rumbens said the 2014 calendar year was expected to deliver nominal retail sales growth of 5.4%, compared with 3% average annual gains over the past four years.

"That is reminiscent of the sort of sales growth which was seen regularly pre-GFC, but has been absent since," he said.

"The other key difference for retailers about 2014 (compared with what has generally been seen in the post-GFC environment) is that there has also been some price growth among those gains.

"Retail price growth over calendar 2014 is expected to come in at 2.1%, compared with an average gain of 0.8% per annum over the past four years."

Some of the price growth has been attributed to a falling Australian dollar - something the Australian Industry Group chief executive Innes Willox said needed to continue.

"The good news out of (last Wednesday's) GDP data is the reaction of the Australian dollar, which briefly fell below US85 cents after the data were released . . . but Australian business needs it to stay lower for much longer, if they are to see any real benefits," he said.

Mr Rumbens said Deloitte's Christmas survey found retailers were more confident about their ability to increase margins this holiday season but warned it would not last indefinitely.

"The more supportive environment is thanks particularly to low interest rates and a handy dividend to retailers from the rapid pace of house price gains," he said.

"The healthy retail environment may extend into 2015 but then gradually fade.

"Too much support at the moment is coming via low interest rates, and that support will dissipate over time, although labour income growth should improve over time and provide some offset."

Mr Rumbens said New South Wales continued to dominate the retail growth - "putting daylight between itself and other jurisdictions".

"This does highlight the role of low interest rates and rising house prices (with the latter very much led by Sydney in this cycle) in stimulating retail spending," he said.

"Those drivers won't last and New South Wales will likely come back to the pack in 2015.

"Despite current woes with weak commodity prices and falling resources investment, Western Australia and Queensland are still expected to deliver the strongest retail growth over the next five years, with stronger trade linkages to the world's key growth economies - China and India."