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Watch: Cheaper prices keep Aussies spending

Watch: Cheaper prices keep Aussies spending

Weak wage growth is making retail shoppers more price sensitive, and food, electronics and pharmaceuticals are driving everyday spending.

Australians spent $311bn on retail goods and activities, including food and clothing, in 2017, according to data released by the Australian Bureau of Statistics (ABS).

Retail sales were 0.5% lower in the month of December, but spending rose 0.9% for the December quarter, supported by weak prices, CommSec Chief Economist Craig James said in a note. Retail prices fell 0.1% in the year to December.

The average Australian spent $3 more a week on retail goods in 2017 compared with 2016, with the average wage up by around $30 a week.

On average, Australian consumers spent $241 a week on retail goods and activities, with food purchases taking the largest share of this with an average spend of $97.70 a week, up 3.2% on 2016.

Weak wage growth has led to price-sensitive shopping, James said, “but retailers have actually responded by trimming prices, thus supporting sales”.

“It is clear that Aussie consumers are spending, but selectively, no doubt using technology to shop around and get the best price, either at home or overseas,” James said.

Electronics, clothes and toiletries spending up

In 2017, Australians bought over 8% more electrical and electronic goods, including phones, computers and televisions, as prices dropped by around 6%, according to the ABS figures.

Pharmaceutical, cosmetic and toiletries spending jumped, up 5% on the year-ago figure, and spending at cafes and restaurants was also up by 5%.

Clothing prices were estimated to have dropped by about 4% over 2017, contributing to a 5% increase in spending in that category.

Aussies spent less on newspapers and books, and spending on hardware, building and garden supplies was lower.

Consumer spending drives economy

Total spending on retail goods and services rose by 2.7% in 2017, one of the slowest calendar-year spending results in the past 50 years, James noted.

“Consumer spending drives the Australian economy,” he said. “The pressure on retailers won’t let up any time soon, especially with the entry of retailers such as Amazon.

“Retailers will need to keep costs controlled and focus on non-price strategies to drive spending, such as differentiating on service, value for money or the quality of the retail offering.”

Things to consider: Commonwealth Securities Limited ABN 60 067 254 399 AFSL 238814 (CommSec) is a wholly owned but non-guaranteed subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL 234945 and a Participant of the ASX Group and Chi-X Australia.

This article is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Commonwealth Securities Limited ABN 60 067 254 399 AFSL 238814 (CommSec) is a wholly owned but non-guaranteed subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL 234945 and a Participant of the ASX Group and Chi-X Australia.