State trends in household spending

ABS Quarterly Update:

New figures for retail and motor vehicle sales have been released and there are considerable differences across the states. Figures for Western Australia and Queensland identify a clear softening trend in the level of household spending growth. The recent data are consistent with our expectations for slowing population growth, primarily attributed to a fading of the mining boom.

Population growth has a pervasive effect on the economy, but it is one of the most dated of the official statistics – the current data is available to September quarter 2013. As the chart below shows, population growth in Western Australia and Queensland slowed during 2013. As the mining and energy sector gradually moves from its construction phase into a production phase, population growth in Queensland and Western Australia is expected to moderate further during 2014 and 2015.

Population growth, annual rate

Population growth, annual rate

Source: ABS, MacroPlan

Synchronisation between population growth and retail turnover

One of the primary factors underpinning the performance of a state’s retail turnover is population growth.

Australia experienced a decline in population growth and retail spend in 2009.  This contraction coincided with the global financial crisis and a reduction of international student entry numbers.

Most recently, Queensland and Western Australia experienced strong growth in population and retail turnover over the two years to June 2013, largely underpinned by a significant inflow of skilled migrant (457 visa) workers.

Since then, retail sales growth has slowed sharply in Western Australia, and moderated in Queensland.  This data provides some indication that population growth is slowing further in these states.

The trends for Western Australia and Queensland contrast with improving retail sales growth for New South Wales and Victoria, on the other hand. It is notable that Sydney has experienced the highest growth in residential property values and residential building approvals, which is likely to be contributing to its outperformance. In addition, the divergent trends across the states is at least partly attributable to weaker consumer sentiment, due to an anticipation of the mining downturn.

Retail turnover (annual growth in real terms)

Retail turnover (annual growth in real terms)1Retail turnover (annual growth in real terms)

Source: ABS, MacroPlan

Stark differences in retail sales growth between New South Wales and Victoria and Queensland and Western Australia are also evident in motor vehicle sales. From the middle of 2013, there has been a sharp slowing in the motor vehicle sales figures for Queensland and Western Australia. The trend figure for the month of May 2014 showed an annual drop of approximately 7%. The figures for New South Wales and Victoria have softened in recent months, but have been more steady over the past two years.

Motor vehicle sales by state (monthly trend number, indexed to May 2012)

Motor vehicle sales by state monthly trend number indexed to May 2012

Source: ABS, MacroPlan

About MacroPlan:
MacroPlan regularly provides market insights and leading economic commentary for a variety of government and private organisations, across all property sectors. Our Chief economist Jason Anderson can be contacted at the Sydney Office on 02 9221 5211 or by email at anderson@macroplan.com.au.

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