Weakened sales in retail from 2018 are expected to carry over into 2019, according to Deloitte Access Economics' latest quarterly Retail Forecasts report.
Real retail turnover growth is expected to slip from 2.2% in calendar 2018 to 1.6% growth in 2019, before lifting back to 2.2% growth in 2020.
The report predicts the willingness of households to forgo savings for spending will come under pressure as the housing market moderates.
Deloitte Access Economics partner and Retail Forecasts principal author David Rumbens said the retail sector in Australia was growing in an unconventional way.
“Australia's retail sector has been sustaining a reasonable rate of sales growth in an unconventional way – not so much from income growth, but leveraging off consumers' willingness to spend.
“That willingness to spend has been supported by very strong asset price growth, creating a massive windfall for one set of consumers.
“But for another, and largely separate group, that have been associated with a significant lift in debt commitments.”
Consumer spending growth over the past five years has averaged 2.5% per annum, but growth in household disposable income has only averaged 1.9%.
“That difference is a fair chunk of change, and it's fair to say that many retailers have only survived the last few years because we've lived beyond our means. But that ship has sailed now.
“Housing gains have dried up, and there are question marks over the sharemarket as well.
“Labour income growth is good, but not good enough yet to avoid some damage to retail growth in the absence of an excuse to run down savings further.
“And when overall net wealth is heading downwards, it provides a fairly strong incentive for people to be more prudent with their cash.
“That leaves 2019 as retail's gap year – nursing a hangover before getting ready to move ahead in a year's time.”
Rumbens said that, like all good gap years, retailers can use the opportunity to position themselves for recovery and success.
“It shouldn't just be about survival.
“Retailers should ensure they are focused on competitive advantage, strengthening connections with customers and streamlining operations so that, when broader market growth does return, they are in best possible position to take advantage of it.”
He also said that with asset price trauma expected to have largely worked through the economy by 2020, labour income growth would once again be a key underlying growth driver.
“There is upside pressure on wages, particularly in pockets of hot demand such as infrastructure and digital, and this is expected to continue building through 2019, providing a stronger platform for retail spending into 2020.”