David Rumbens, Partner, Deloitte Access Economics, Presented on 'Deloitte Access Economics Retail Forecasts: The Year Ahead and What You Need to Know'

1. David Rumbens, March 2019
Retail
Forecasts:
The year
ahead

2. 2© 2019 Deloitte Access Economics Pty Ltd. All rights reserved.
2019 – Retail’s gap year
Overview
Source: ABS 8501.0, Deloitte Access Economics
• The broader economy slowed in the 2nd half of 2018.
• The slowing economy, combined with high household debt, is testing the willingness
of households to keep spending.
• Much of the retail pain will be felt in 2019, with a stronger outlook for 2020 as
income growth strengthens and housing markets stabilise.
National retail turnover growth
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
2016 2017 2018 2019 2020 2021 2022 2023
Forecast

3. 3© 2019 Deloitte Access Economics Pty Ltd. All rights reserved.
• Overall consumer spending growth over the past five years has averaged 2.5% per annum, but growth in household
disposable income has only averaged 1.9%.
• That difference is significant, and it’s fair to say that many retailers have only survived the last few years because we’ve
lived beyond our means. But that ship has now sailed.
• Both Sydney and Melbourne’s housing markets have seen prices fall as (un)affordability bites and as investors pull back.
Wealth gains have supported retail, but they are now ebbing
Australian economy
House price growth (% change) Income vs spending growth
-2%
0%
2%
4%
6%
Real household disposable income
Real consumer spending
year-to % change
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
Sydney Melbourne

4. 4© 2019 Deloitte Access Economics Pty Ltd. All rights reserved.
-20%
-10%
0%
10%
20%
30%
40%
50%
• CFO optimism weakened in the 2nd half of 2018, with uncertainty rising.
• This is producing a dampening in risk appetite – the majority of CFOs suggest now is not
the time to take on more risk.
Business sentiment has turned – it’s now a glass half empty
Australian economy
Net optimism compared to 6 months ago – Deloitte CFO Survey

5. 5© 2019 Deloitte Access Economics Pty Ltd. All rights reserved.
• Jobs is one area of stunning success for the Australian economy. Nearly 300,000 jobs were added throughout
2018, driven primarily by full-time employment. This follows a gain of over 400,000 jobs in 2017.
• Wage growth has started to show some improvement. With the labour market continuing to tighten and bonuses
increasing, we expected the rate of wages growth to improve further going forward.
Not all bad news – employment growth has been very strong
Australian economy
Employment growth, persons (‘000) Wage price index, year-to %
-50
0
50
100
150
200
250
300
350
400
450
Forecast
0%
1%
2%
3%
4%
5%
Forecast

6. 6© 2019 Deloitte Access Economics Pty Ltd. All rights reserved.
• Victoria and New South Wales have been
the standout States in terms of
employment growth over recent years.
• Queensland job growth improved over
2018, in part with improved gas exports
and new investment.
• Western Australia and the Northern
Territory have been hit hard by the
mining-related construction slowdown
• Looking forward, New South Wales and
Victoria are now faced with deflating
housing values, which will slow their
momentum.
• There may be a narrowing of State
economic performance from 2019
onwards as sunbelt States emerge from
their downturn.
State growth
Australian economy
Annual employment growth by State, 2018 to 2023
Employment growth, persons (‘000) by State,
2018 calendar year
-20
0
20
40
60
80
100
120
140
160
NSW VIC QLD WA SA ACT TAS NT
0.0%
0.5%
1.0%
1.5%
2.0%
QLD VIC NT SA NSW WA TAS ACT

7. 7© 2019 Deloitte Access Economics Pty Ltd. All rights reserved.
• Household goods and apparel have
been the standout categories within
retail over the last five years.
• Department stores have grown
slowly over the last five years, losing
out to online competitors, and may
continue to struggle.
• Other retailing includes many
online-only retailers, and should
continue to see solid growth.
• Supermarket and specialty food
retailing are expected to see
improved retail spending growth
over the next five years as demand
drivers move from wealth to income.
Category performance
Retail outlook
Retail spending (volumes), five year average growth
Source: ABS 8501.0, Deloitte Access Economics
0%
1%
2%
3%
4%
5%
6%
7% 2013 to 2018
2018 to 2023

8. 8© 2019 Deloitte Access Economics Pty Ltd. All rights reserved.
Spending patterns moving towards essentials
Retail trends
35% 29% 36%
Dwelling Services Retail related goods
and transport
30% 29% 41%
Dwelling Services Retail related goods
and transport
Food, 11%
Catered food, 6%
Furnishings, 6%
Recreation goods, 5%
Alcohol & tobacco, 4%
Apparel, 4%
Chemist goods, 2%
Newspapers and books, 2%
Motor vehicles and
transport, 7%
Rent and other dwelling
services, 21%
Electricity, gas and other
fuel, 2%
Accommodation, 2%
Communications, 2%
Other health services, 5%
Education services, 4%
Recreation services, 6%
Insurance/financial
services, 10%
2007-2008
Food, 10%
Catered food, 6%
Furnishings, 5%
Recreation goods, 5%
Alcohol & tobacco, 4%
Apparel, 4%
Chemist goods, 2%
Newspapers and books, 1%
Motor vehicles and
transport, 11%Rent and other dwelling
services, 22%
Electricity, gas and other
fuel, 3%
Accommodation, 2%
Communications, 2%
Other health services, 5%
Education services, 5%
Recreation services, 5%
Insurance/financial
services, 10%
2017-2018

9. 9© 2019 Deloitte Access Economics Pty Ltd. All rights reserved.
Spending across age cohorts
Retail trends
0%
5%
10%
15%
20%
25%
Food and non-
alcoholic
beverages
Transport Recreation Medical care
and health
expenses
Communication Clothing and
footwear
Household
furnishings and
equipment
Household
services and
operation
Alcoholic
beverages
15-24 25-54 55+
Spending proportion (excluding housing costs) by age

10. 10© 2019 Deloitte Access Economics Pty Ltd. All rights reserved.
Spending by homeowners
Retail trends
Spending proportion (excluding housing costs) - owners vs renters
0%
5%
10%
15%
20%
25%
Food and non-
alcoholic
beverages
Recreation Transport Household
furnishings and
equipment
Household
services and
operation
Clothing and
footwear
Domestic fuel
and power
Alcoholic
beverages
Tobacco
products
Owner without a mortgage Owner with a mortgage Renter

11. 11© 2019 Deloitte Access Economics Pty Ltd. All rights reserved.
Global Powers of Retailing 2019
• Just 39 of the top 250 global retailers currently operate in
Australia. Future years may see further market entry and
additional competition in Australia.
Key opportunities for Australian retailers during a year of
disruption include:
• Looking beyond our market – particularly to China
which has 700 million internet users.
• Collaborations, strategic partnerships and
acquisitions – focus on developing new and adjacent
services to drive growth.
• Responsible practices – consumers increasingly expect
that brands should be accountable for sustainable
manufacturing practices, transparency and reducing their
overall carbon footprint.
Year of disruption - GPOR

12. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms,
each of which is a legally separate and independent entity. Please see www.deloitte.com/au/about for a detailed description of the legal structure
of Deloitte Touche Tohmatsu Limited and its member firms.
About Deloitte
Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globally
connected network of member firms in more than 150 countries, Deloitte brings world-class capabilities and high-quality service to clients,
delivering the insights they need to address their most complex business challenges. Deloitte's approximately 200,000 professionals are committed
to becoming the standard of excellence.
About Deloitte Australia
In Australia, the member firm is the Australian partnership of Deloitte Touche Tohmatsu. As one of Australia’s leading professional services firms.
Deloitte Touche Tohmatsu and its affiliates provide audit, tax, consulting, and financial advisory services through approximately 6000 people across
the country. Focused on the creation of value and growth, and known as an employer of choice for innovative human resources programs, we are
dedicated to helping our clients and our people excel. For more information, please visit our web site at www.deloitte.com.au.
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited
© 2017 Deloitte Touche Tohmatsu