Retailers are hoping Australians navigating the cost-of-living crisis will have room in their budgets for an end of financial year (EOFY) splurge, with new data predicting fewer families are set to spend more this year.
Figures published by the Australian Retailers Association (ARA) on Tuesday forecast $9.3 billion in EOFY sales in 2023 – up $500 million on 2022 – amid aggressive discounting from retailers.
The ARA data was pulled from an SMS survey of Australians between Friday, May 19 and Wednesday, May 24.
But the data, compiled from a Roy Morgan survey, predicts 400,000 fewer Australians will spend this year amid skyrocketing budget pressures, ARA chief executive Paul Zahra said.
“Discretionary spending is certainly softening, but the reality is that those not significantly impacted by interest rate increases are looking for great deals,” Mr Zahra said on Tuesday.
EOFY spending hurdles
Big-name retailers including the Good Guys, JB Hi-Fi and Harvey Norman began double-digit discounts on big ticket items advertised as EOFY discounts.
Gary Mortimer, a retail expert and professor at Queensland University of Technology, said retailers typically use EOFY sales to clear their warehouses of winter merchandise.
“Household goods retailers will be looking to clear their warehouses of heaters so they have room for fans and air-conditioners,” he said.
Retailers will be coming up against the biggest slowdown in the economy in years this EOFY, with retail spending data showing shopping activity had “ground to a halt” in April amid rising interest rates.
Economists say many households have stopped discretionary spending, which includes big household items like white goods and electronics that are typically discounted during June.
Household goods retailing was particularly weak in April, with sales falling 1 per cent, the largest of any category, despite a recent surge in population growth and demand for new housing.
Dr Mortimer predicts that key discretionary categories like household goods will continue to show weakness, even if overall retail spending continues to hover around $35 billion a month nationwide this year.
Tax office changes have also presented new hurdles for people making work-from-home claims on their returns this year, with the COVID-era shortcut method giving way to depreciation claims.
In fact, tax experts have warned that Australians face smaller tax returns in 2023-24 because many are expected to have missed the memo and failed to keep diaries of remote work hours.
Aggressive discounting
Dr Mortimer expects retailers will discount particularly aggressively this year in a bid to entice cash-strapped consumers to spend.
“There will be those consumers who are tied to a mortgage, have come off fixed rates and are struggling to make ends meet,” he said.
“But there will be also other shoppers out there who don’t have a mortgage and are in a good financial position.”
The ARA expects older taxpayers – those aged between 50 and 64 – will be the biggest EOFY shoppers this year, set to splurge $3.5 billion, or 37.6 per cent of total forecast spending.
Older taxpayers are more likely to be home owners who have paid down their mortgages and thus have escaped much of the cost-of-living squeeze currently pressuring other households.
“The mid-year sales are a fantastic opportunity for bargain hunters to grab a great deal as retailers slash prices on a range of clothes, shoes, accessories, homewares and electrical to make way for new season’s merchandise,” Mr Zahra said.
