ARA RETAIL
INSIGHTS REPORT

Despite the spending slowdown, the Australian economy shows resilience. While interest rates impact many, the country’s population growth, including newcomers unaffected by these rates, brings new spending power.  

Mid-year tax cuts are expected to boost discretionary spending. For retailers, understanding customers and targeting segments less impacted by the cost-of-living crisis is crucial.  

Retail sectors will experience varying impacts throughout 2024. Small businesses, in particular, face continued struggles with the spending slowdown and rising costs, often earning less than their employees.  

Consumer spending typically lags six months behind interest rate increases, so we expect the slowdown to linger through much of 2024.  

A key development is the Reserve Bank of Australia’s decision to limit cash rate decisions to eight annually. Interest rates influence the retail landscape, affecting everything from consumer confidence to employment rates. The RBA’s decisions in 2024 will be crucial, now impacting two months at a time, elevating their significance in shaping retail outcomes. 

These decisions affect more than homeowners. They sway consumer confidence, rental markets, business viability, and employment rates. For an industry reliant on discretionary spending, the RBA’s actions are pivotal in dictating retail sales pace.

Policy-wise, last year saw intense debates over major workplace reforms. The government introduced numerous changes to the industrial relations system, culminating with the controversial Closing Loopholes legislation. The government split this bill, fast-tracking some measures while also introducing contentious changes to labor hire and union rights.  

Retailers, especially smaller ones lacking resources, face difficulty adapting to these extensive reforms. Abrupt policy shifts without proper industry consultation can exacerbate many of the challenges the sector is facing.  

Our key recommendations to the government include boosting supply chain resilience, supporting disaster mitigation, and incentivising investments in AI and sustainability, especially for small businesses. 

With the upcoming Federal budget, we advocate for measures promoting innovation and collaboration between government and industry.  

Integrating technology is a priority for retailers in 2024, but their capacity is strained by the ongoing crises.  

Sustainability will also continue to be a significant trend. Consumers are increasingly conscious of their environmental impact. Businesses that adopt eco-friendly packaging, sustainable sourcing, and carbon-neutral shipping will not only contribute positively to the planet but also to their brand loyalty and customer base.  

The past year’s challenges have tested and reinforced the industry’s ability to evolve. As 2023 commenced, retailers had benefited from a record holiday season, providing sustenance through upcoming hardships. 

As the nation’s largest private employer, the stakes are high for both the industry and the broader economy. Retail is in the spotlight this year, with the Government and the Reserve Bank’s decisions having significant sway in the months ahead.