Australian retail spending surges, driven by clothing and household goods

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Not even an eight-week election campaign could dampen the retail spending of Australian consumers.

Clothing, household goods and department store sectors all benefited from a 3.7 per cent year-on-year increase in May, according to data from the latest MasterCard SpendingPulse report.

Shop till you drop: Australians did not curb their retail spending for a federal election. Photo: Edwina Pickles

"I find it fascinating that we have had that increase the last three months in the midst of an election," said Sarah Quinlan, MasterCard's New York-based senior vice-president of market insights.

"This shows the Australian consumer is more confident and they were probably confident of the outcome, whatever side they were on."

The SpendingPulse report offers insight on consumer spending habits across all payment forms, analysing the 160 million transactions that take place globally every hour with 1.5 million rules and algorithms to calculate total retail spending.

Australians continue to spend money on the experiential economy, such as dining out. Photo: James Alcock

Ms Quinlan said Australia's spending increase was likely due to a stabilisation of the Chinese economy, which translated into a rise in consumer confidence.

The May report revealed women continue to make 75 per cent of transactions, with discretionary spending the biggest driver of retail sales, particularly in specialty apparel, in which spending remained consistent.

Ms Quinlan said there had been growth in department stores, but unlike specialty apparel, it remained uneven due to a changing "sense of loyalty" in consumers.

Sarah Quinlan, the senior vice-president of market insights for MasterCard Advisors. Photo: Louie Douvis

"One of the big challenges is to really bring people in on a consistent basis because of the lack of time people have in their lives ... [department stores] are going to have to work a teeny bit harder to continue to grab and bring in consumers on a consistent basis."

Another area which continued to attract Australian spending was the experiential economy, a trend Ms Quinlan said mirrors the rest of the world.

"That's dining out, travelling - in those things, we see spending growth. When two people within a family are working their time becomes the most valuable thing they have, so one of the things they choose to do is spend that with family and friends."

While Australia is still awaiting a final count on the weekend's election, how Australian consumers respond to that outcome will not be clear until the June and July SpendingPulse reports.

"That will be the question of what sort of impact the fiscal policies have going forward, in terms of the Australian consumer's psyche," Ms Quinlan said."How do they feel about things? Are they confident they will hold jobs, [receive] a bonus, have a wage increase?"

Trends in Australia's housing market have also been likely drivers for a drop in consumption of household goods, which has been falling from its peak in July 2015.

Ms Quinlan believes the drop is linked to the significant decline of the owner-occupied housing market, compared to that of the "home-to-let".

"Consumers are not buying as many homes that they are occupying. And when you buy a home as an investment property, you don't buy the goods for it."

She added that a drop in consumption of household goods and appliances was also evident among Chinese investors and consumers living in Australia.

"There's been a lot of dependency in the Australian market of that new Chinese investor consumer, but in the last two quarters we've actually seen their spending on appliances and electronics go negative."

Ms Quinlan said that indicated they have "clearly pulled back their investment in the Australian economy," in both housing as well as other areas.

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