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Australian retail sales grew 2.3% against the last year in March 2021, with several media reports highlighting the softening of retail demand. But the March headline growth number is misleading, given the 10% surge in March 2020 as panic buying took hold. The reality is that retail sales in March 2021 were 13% above March 2019, continuing the strong trend from November last year.

I’ve graphed this two-year-growth by month from April 2019, using the official data from the Australian Bureau of Statistics. The overall message is stark. After the national lockdown through April and May 2020, headline retail growth against two years ago has averaged more than 10%. Were it not for Melbourne's stage 4 restrictions from August to October, this would have been higher again.

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The obvious question is ‘why has retail spending been so strong, even in the face of a global pandemic?’ There are several answers to this, not least of which is the Federal stimulus provided in the form of JobKeeper and other programs. Another reason is the captive nature of our capital in the absence of international travel. Before the pandemic, Australians spent upwards of $60 billion each year on overseas trips. Over the past year, these dollars have remained in Australia – driving both local spending on retail, and a much higher rate of savings.

But the news is not all positive. Whilst headline retail growth remains strong, categories such as fashion, arts, and CBD retail remain weak. Commenting on the preliminary ABS data last week, Australian Retailers Association CEO Paul Zahra noted that in addition to these categories, travel retailers are on their knees. International travel still seems a distance away, and Australia’s stuttering vaccination program has not been the confidence-booster we may have hoped.

With city workers continuing to work more from home and international tourism having dried up, CBD-based retailers are feeling the pinch of the end of JobKeeper this month. Melbourne Lord Mayor Sally Capp said last week that pedestrian traffic was still only at 50% of pre-pandemic levels. Encouragingly, public service employees have begun to return to Melbourne office buildings this month, with commercial and professional services firms already urging their staff to return.

Whilst JobKeeper has now been wound back, releasing of the private “stimulus” of increased household savings should soften the impact. Assuming the government’s vaccination program can get back on track, private savings should both continue to support local spending and eventually fuel a gradual take-up of international travel.

Next week the ABS will release the March retail numbers by category, where we should expect to see a continuation of the strength of liquor, home and grocery whilst fashion, department stores and restaurants are likely to be more subdued.