Deloitte Access Economics has released its latest Retail Forecasts report, painting a grim picture of Australia’s retail sector in 2023, while 2024 is forecast to be a year of two halves, with the second half looking more optimistic.

Deloitte described 2023 as the ‘worst year for retail sales growth in a generation’. Retailers reportedly had to resort to significant discounting to attract customers, a strategy that boosted sales but heavily impacted margins. ABS data shows that profits in the retail sector increased by a mere 1.4% over the year, a fall in real terms, with profits particularly falling away at the end of the year, down 10.9% in the December quarter.

“Retailers have really struggled over the past year. 2023 was the worst year for retail sales growth in a generation, and retailers had to offer significant discounts to get customers in the door,” said Deloitte Access Economics partner and principal report author, David Rumbens.

Looking ahead, the first half of 2024 is anticipated to see a continuation of 2023’s cautious consumer spending and aggressive retailer discounting. However, the second half is expected to be more favourable, with real wage growth, disinflation, updated stage three tax cuts, and likely interest rate cuts predicted to boost the economy.

“The second half of 2024, however, is expected to be a turning point for the Australian economy. Real wage growth and disinflation are expected to continue, the updated stage three tax cuts will loosen purse strings, and interest rate cuts are likely,” Rumbens said.

The report predicts that 2025 will build on the strength of the second half of 2024, with real retail turnover expected to increase by 0.9% and 2.2% in 2024 and 2025, respectively.