MasterCard says Australian retail sales ‘worrisome’
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MasterCard’s Sarah Quinlan says a cooling property market is hitting retail sales. Australian retail sales will rise in 2016, but slowing wages growth and a cooling property market here and in China is dampening growth. That’s the prediction based on MasterCard’s first monthly analysis of millions of card payments made on card terminals.
It began tracking retail sales in Australia last year based on all transactions at terminals and claims this gives more accurate data than that provided by the Bureau of Statistics, which relies on surveys.
MasterCard’s first monthly survey of payments in Australia predicts retail spend will drop further. Photo: Jim Rice
Sarah Quinlan, MasterCard’s New York-based senior vice-president of market insights, said retail sales year-on-year in Australia grew 3.2 per cent in value in January compared to a year earlier.
Year-on-year sales growth in January 2015 was running at about 6 per cent.
She said growth at the moment is due to inflation because of a depreciating Australian dollar and the trend down is being driven by real wages growth declining. This has been reinforced by house prices cooling because regulators have capped investor lending.
A big slowdown in spending by Chinese tourists and investors is the other main factor which is hitting all countries.
“You could have absolutely predicted the real estate outcome,” she said. “There’s two things I watch in spending; I watch consumer confidence and wage growth.”
“You could have absolutely predicted the real estate outcome,”
Growth due to importing inflation
In the US, she said, wage growth has been poor, but consumer confidence is higher than in Australia now.
“They are absolutely confident they are going to hold their job now or they can find a job if they want to switch. It is the opposite of what’s happening here,” Ms Quinlan said.
“While you still have a positive growth rate in your spending in Australia, it is of a worrisome nature because it is more due to importing inflation due to a 35 per cent drop in the Australian dollar [versus the US dollar] since 2012.”
The pullback of Chinese money, she said, is due to a property bubble there and numerous senior officials being hit with corruption allegations.
“We can tie exactly back to the day back in August 2013 that [politician] Bo Xilai was arrested for corruption and there’ve been 100,000 people arrested for corruption subsequently. So they are just not showing their wealth now,” she added.
“And this debt bubble up there is huge right now, it makes ours pale by comparison. By our calculations around 75 per cent of the economy in China is owned by state-owned enterprises. So the state has been running this huge bubble.”
As well as Australia, MasterCard produces a monthly report called SpendingPulse based on 160 million transactions per hour on its network for the US, Japan, Canada, Brazil, Hong Kong and Britain.
Questions & Answers
Q.Why is MasterCard's analysis of retail sales considered more accurate than official statistics?
Why is MasterCard's analysis of retail sales considered more accurate than official statistics?
MasterCard tracks retail sales based on all transactions at card terminals. They claim this method provides more accurate data compared to the Bureau of Statistics, which relies on surveys for its figures.
Q.What is driving the current retail sales growth in Australia, according to Sarah Quinlan?
What is driving the current retail sales growth in Australia, according to Sarah Quinlan?
Growth is primarily due to inflation, caused by a depreciating Australian dollar. Sarah Quinlan noted that real wages growth is declining, which impacts actual purchasing power.
Q.What two key factors does Sarah Quinlan monitor regarding consumer spending?
What two key factors does Sarah Quinlan monitor regarding consumer spending?
Sarah Quinlan closely watches consumer confidence and wage growth as the two main indicators for consumer spending. She believes these are crucial for predicting retail trends.
Q.What are the main reasons for the slowdown in spending by Chinese tourists and investors?
What are the main reasons for the slowdown in spending by Chinese tourists and investors?
The slowdown is attributed to a property bubble in China and numerous officials facing corruption allegations. This has led to less display of wealth and reduced outward investment.
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