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Population Growth Saving Retailers From Falling Off A Cliff Claims New Research

Consumer electronics and appliance retailers are benefitting from population growth and the building of new homes, according to new Roy Morgan retail research.

They claim that despite the intense cost of living pressures on households during 2023, the much-feared consumer spending ‘cliff’ did not result in major problems for retailers as consumers, many who are still employed have continued to spend savings that they built up during COVID lockdowns.

Several retailers have told ChannelNews that the current market “Is more replacement than new” with new products set to be launched later this year set to be a major driver of traffic to stores.

Last week Harvey Norman Chairman Jerry Harvey claimed that a big driver will be artificial intelligence.

Earlier today it was revealed that Australian economy grew by a weak 0.2 per cent in the three months to December, steady from the previous quarter but dragging annual growth down from 2.1 per cent to 1.5 per cent.

While the national economy overall grows, questions are being raised over Labors policies with real GDP on a per person basis dropping by 0.3.

This was third straight quarterly decline, Australian Bureau of Statistics figures revealed.

Per capita GDP has not grown since late 2022, underlining the intense pressure facing individual households which has been masked by blockbuster net migration through last year.

The Federal Labor Government is already warning of a significant slowdown in the Australian economy through the final months of 2023, and that the government’s policy focus through 2024 would shift going forward.

Bureau Of Statistics figures show that Australia’s population grew by 2.4% in the 12 months to June 2023, adding 518,100 people to our population from overseas migration.

This record growth did much of the heavy lifting in helping the country avoid recession.

While the intake of migrants is set to scale down in 2024, this boost to the population will continue to help retailers selling value and affordable premium products in particular household products such as TV’s appliances, smartphones and notebooks.

One issue impacting the market is record low Consumer Confidence which Roy Morgan claims will likely persist until consumers feel certainty that the cycle of rate rises has ended.

In 2023 consumer confidence hovered at recessionary lows, however consumer confidence is coming back according to ANZ Roy Morgan surveys following the announcement of lower-than-expected ABS official inflation for November and again in January.

Sitting at 3.4%, some economists are predicting cuts coming sooner rather than later and this will help retailers.

The downside is that 31% of mortgage holders or 1.49 million Australians who have a mortgage are ‘At Risk’ of Mortgage Stress claim researchers and this is a problem for retailers with goods only being replaced when there is a problem, or they are at end of life.

‘Mortgage stress’ is still hovering at concerning levels seen only a handful of times since the GFC claims researchers.

The latest Roy Morgan Mortgage Stress indicator shows that 1,609,000 mortgage holders were ‘At Risk’ of ‘mortgage stress’ in the three months to January 2024, following the November increase lifting rates to 4.35%.

This represents a new record high total for mortgage holders considered ‘At Risk’ of mortgage stress, beating the previous record highs above 1.56 million in August and September 2023. The number of Australians ‘At Risk’ of mortgage stress has increased by 802,000 since May 2022, when the RBA began a cycle of interest rate increases.

Meanwhile, the number of mortgage holders considered ‘Extremely At Risk’ of mortgage stress is now sitting at 994,000 or 19.8% of mortgage holders.

This is significantly above the long-term average over the last 10 years of 14.3%.

Current retail sales are being achieved because interest rate rises aren’t affecting everyone, there are still cohorts with spending power claims Roy Morgan.

Around 34% of Australians are mortgage holders, with the remaining two thirds split between those who rent and those who own their homes outright.

The latter group of homeowners represent around 34% of the population – a significant cohort whose spending power is unaffected with these consumers now driving the retail economy.

In addition, many young adults are also free from the burden of market rents and mortgages eating into their discretionary spending – with just over half of young men (54 per cent) and 47 per cent of young women aged 18 to 29 years old still living under the same roof as their parents.

The good news for retailers is that despite cost-of-living pressures over 2023, Australians are back to holidaying, as travel continues on the road to reclaiming its share of wallet with CE retailers benefitting from consumers upgrading their smartphones for ones with better cameras, others are back buying digital SLR cameras before they travel.

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