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Economics update | 3 February, 2023
02 Feb 2023
Retail sales drop 3.9 per cent in December
Seasonally adjusted retail trade fell 3.9 per cent during December 2022 compared to the previous month. However, compared to December 2021, retail sales were up 7.5 per cent.
Department stores recorded the largest decline in monthly turnover, dropping 14.3 per cent. This was followed by clothing, footwear and personal accessory retailing, down 13.1 per cent. Food retailing was the only industry to record a rise in December. Cafes, restaurants and takeaway food services remained largely unchanged from November.
The monthly drop in retail sales is the first decline in 11 months and suggests that eight consecutive rate rises by the Reserve Bank may beginning to be having an impact on consumers. It also reflects changing spending habits with consumers bring forward Christmas spending to November to take advantage of Black Friday and Cyber Monday sales.
IMF Australia Report
The International Monetary Fund (IMF) expects Australia’s economy to achieve a soft landing in 2023 despite the risks still significantly skewed to the downside. They project real GDP to drop from 3.6 per cent in 2022 to 1.6 per cent in 2023 before rising slightly to 1.7 per cent in 2024. The IMF attributes the significant deceleration in Australia’s economy to tighter financial conditions, declining real incomes, declining house prices and poor global growth.
The IMF recommends further tightening of monetary policy in the near term to mitigate strong domestic demand and curb inflation, calling for the Reserve Bank of Australia (RBA) to continue raising interest rates at a pace driven by data. Consumer prices are forecasted to drop to 5.5 per cent in 2023 to 3.2 per cent in 2024, just above the RBA target range. The IMF also notes the need for comprehensive tax reforms and improved efficiency in expenditure programs to underpin medium-term fiscal consolidation.
The IMF recommends a strong focus on structural reforms to reignite productivity growth and boost inclusion. Recent initiatives to tackle labour and skills shortages were welcomed, but said there was greater scope to boost innovation, competition and improve education outcomes. It forecasts unemployment to begin to rise in 2023 to 4 per cent and further in 2024 to 4.2 per cent.
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