‘Tide turning’: Retailers can hope for a better year in 2025, says Deloitte

A notable uptick in retail spending in October should serve as a promising sign that a long-awaited consumer recovery is around the corner in 2025.

According to fresh forecasts from Deloitte Access Economics to be released on Friday, real retail turnover is expected to lift 2.1 per cent in 2025, and 2.5 per cent in 2026 — an improvement from the 0.3 per cent fall in 2024.

Deloitte Access Economics partner David Rumbens said an official interest rate cut, which most banks are tipping will come next year, could be the green light consumers need to see before feeling comfortable to spend. He pointed to Australian Bureau of Statistics data this week which revealed retail turnover rose 0.6 per cent in October.

Mr Rumbens said there was a much earlier uplift in searches for “sales” in Google trends data compared with 2023, suggesting consumers were starting to shift from saving to spending.

“Part of the story has been an uptick in savings since tax cuts started making their way to consumers in July,” he said.

“It was clear that consumers wanted to build back up their savings buffers and pay down mortgages before spending.

“But the tide is turning. The notable improvement in consumer sentiment in recent months and the extra dollars from tax cuts is starting to flow through to live retail data now.” But Mr Rumbens also warned of the risks ahead, including the “discount dilemma”.

Deloitte said retailers could not sustainably discount forever, yet it still feels like a necessary evil to get consumers through the door.

“The impacts of potential trade policy changes from a new administration in the US and the upcoming domestic Federal election may also introduce some bumps in 2025,” Mr Rumbens said.

“However, these risks should not overshadow the fact that a consumer recovery is on the cards for 2025 and beyond.”

The Deloitte forecasts come after the ABS on Thursday revealed household spending rose by 0.8 per cent month-on-month in October.

AMP economist My Bui said both sets of ABS data this week revealed household spending in Australia had “probably bottomed”.

“October discretionary purchases starting to pick up slightly (after two years of cutting back),” she said.

“This rebound is also consistent with recent consumer sentiment surveys JUthat showed a slightly less negative level of spending intention ahead of the holidays.”

Fresh research from National Australia Bank on Friday will also reveal 41 per cent of small business owners in WA say profitability is the biggest concern keeping them awake at night.