EDS: Not for use before 0001 AEDT Wednesday, March 13
By Colin Brinsden, AAP Economics Correspondent
CANBERRA, March 13 AAP - Short-term gains from discounting which come at the expense of profit margins have made it more important than ever for retailers to cut costs, an independent forecaster says.
Deloitte Access Economics expects soft consumer demand will continue to affect the sector in 2013, after a disappointing 2012.
In its latest quarterly retail forecasts report, real or inflation adjusted sales are likely to grow by 2.2 per cent in 2012/13 and by 2.5 per cent in 2013/14.
But by 2014/15, retail growth should improve by 3.6 per cent as broader economic conditions and housing activity improves.
"Retailers waiting for the cavalry to arrive are increasingly focusing on containing their costs in order to stay viable," Deloitte Access Economics partner David Rumbens said on Wednesday.
While discounting can help sales in the short term, he said it was often at the expense of profit margins.
"In order to keep prices low on a sustainable basis, and remain competitive in the market, cost control is key," Mr Rumbens said.
However, there were signs retailers were having some success, with wage growth in the sector slowing to the pace seen immediately after the 2008-2009 global financial crisis.
Mr Rumbens said Australia's underlying economic story was not as strong as it had been in recent years, providing the rationale for Reserve Bank of Australia (RBA) interest rates cuts.
He said the cutting cycle was still to fully work through the economy.
"So future consumer spending growth should at least match income growth," he said.
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