Australia’s beleaguered retailers have been dealt another blow in August as cash-strapped shoppers cut back on their spending.

Retail turnover fell 4.2 per cent nationally over the month, preliminary ABS data shows, with Victoria leading the falls with a 12.6 per cent decline.

The rest of the country still suffered a 1.5 per cent drop in August, with household goods retailing taking the biggest hit.

Clothing and footwear sales, and cafe and takeaway food trading, also suffered large falls according to the statistics bureau.

The fall is the first decline in turnover since April.

Retail ‘reality check’ coming

The preliminary data for August reveals a “two-speed retail sector”, according to Indeed APAC economist Callam Pickering.

“In Victoria, spending is greatly restricted and in August was 17.6 per cent below its level in March,” he said.

“Outside Victoria though spending is actually higher now than it was in March.

“That divergence will certainly persist until Victoria emerges from lockdown, which is set to occur in October and November provided Victoria meets certain health goals.”

But the sector as a whole faces a new challenge as JobSeeker and JobKeeper support payments are unwound from their current levels, he said.

As these policies unwind, the Australian economy will experience a reality check.

“We don’t know how much lasting damage has been done by COVID-19 other than to say recessions typically have a lasting impact on economic growth.

“The retail sector will be one area that will be particularly sensitive to lower levels of government support, particularly given wage growth is low and unemployment elevated.”

The JobSeeker rate will be cut from $550 per fortnight to $250 per fortnight from Friday September 25.

Year of pain for sector

The three months to June 2020 marked the retail sector’s worst quarter in 20 years, with turnover falling 3.4 per cent as Australians sealed themselves away in their homes.

Some of the weakness is attributable to panic buying, which saw countless households stock up on items earlier in the year instead of buying during the second quarter, ANZ economists said.

Monthly data from the quarter shows a staggering 17.7 per cent decline in April, followed by a 16.9 per cent lift in May and a 2.7 per cent climb in June amid easing restrictions.

July saw a further gain of 3.2 per cent, led by a jump in spending on clothing and footwear (up 7.1 per cent) and takeaway food, cafes, and restaurants (up 4.9 per cent) across the country.

The only exception was Victoria, where the reintroduction of Stage 3 restrictions across most of the state – and more severe Stage 4 restrictions in the CBD – stifled sales.

“As was the case in April, restrictions led to significant falls in these industries in Victoria” ABS director of quarterly economy-wide surveys Ben James said at the time.