Consumer confidence in Australia has been known to tumble in the wake of the Federal Government’s budget announcement, which for 2018, takes place on Tuesday 8 May.
Inevitably, Australia’s stores are affected if the budget has a negative impact on consumers. ShopperTrak data shows that, dating back to 2013, every May there’s been a sharp traffic decline in the lead up to, and in the immediate aftermath, of the Federal budget announcement (see graph).
Key findings of ShopperTrak data:
- The annual budget announcement takes place on a Tuesday, and the clear trend is that visitor numbers on this day are always lower than the average Tuesday for the year.
- May retail traffic was down against the previous month by -9.8% in 2013, -7.1% in 2014, -11.9% in 2015, -9.8% in 2016, and -6.8% in 2017.
- However trend data confirms that the May slowdown in store traffic is relatively short, with footfall picking up again by an average of 8% in June.
Good news or bad for 2018?
Australian retailers are wising up to this trend, and with planning, can mitigate the expected hit to traffic in May. The big question for 2018 is, if a budget inspires a rise in consumer sentiment, will this translate to improved traffic in stores, or should retailers always expect a dip?
Westpac and the Melbourne Institute’s long-running survey of consumer sentiment recorded a drop of 7% in consumer confidence in 2013, and 6.8% in 2014, as consumers assessed the possible impact of tax increases and spending cuts on their household finances.
However, in 2015 and 2016 consumer confidence peaked for the year in May, suggesting the budget was received positively during those years. And in 2017 when budgetary plans promised measures to deliver “better paying jobs” and “improvements to essential services” that Australians rely on, consumer confidence slipped just 1%.
In 2017 we see that store traffic was down -6.8% Year-on-Year that May – an improvement on earlier years, when budget news was harder for Australians to stomach.
A focus on income tax cuts
All eyes will be on Canberra on Tuesday 8 May when the Turnbull government delivers its budget. Reportedly there will be a focus on income tax cuts and other measures that will ease pressure on Australians’ purses, which could spell a less dramatic hit to consumer confidence, and store traffic, for the month.
It does need to be noted that the historic dip in traffic is short-lived, with footfall picking up again by an average of 8% in June. So, retailers need only plan around the ‘budget effect’ for a short spell.
Also, seasonally, May is a quiet retail month in Australia, regardless of financial news coming from the Federal Government. When compared to the average Tuesday in May, there is little change in retail visitor trends, with May traffic being lower in general, our data shows.
The graph below confirms that sales are lower during the first few months of the year, with May marking the point in the year after which sales start picking up again, regardless of the budget announcement.
Australia retail sales: May is a turning point
Australian retailers should assume shoppers are jittery in May, and super-sensitive to any financial hit to their stretched household budgets that might be announced in the budget.
Retail groups that offer eye-catching deals and in-store events to help ease any expected financial pain, could see conversions rise, and customer loyalty boosted. And with traffic analytics, it’s possible to measure the traffic and conversion outcome of these activities, and keep building on successes over time.