David RichardsNSW is a retail basket case when it comes to retail spending according to Cit Group Analysts however Victoria is even worse. According to a new report. Victoria was the slowest state at 5.6% growth, NSW recorded growth of 6.4%, while Queensland was the fastest growing state at 9.2%.
Overall Australian retail spending grew 6.9% however the reduction in commodity prices is likely to lead to a slowdown in interstate migration and income growth for Queensland and Western Australia in 2009 say Citi Group.
The retail report claims that many retailers have expanded their presence in the resource rich state of WA. However, only a handful of retailers have a large exposure to faster growing regional areas and a small exposure to the weakest state – NSW.
Retailers with the best geographic exposure are Metcash, Harvey Norman and Woolworths.
They claim that Australia is a two-speed economy, whether it be those regions exposed to the resources boom and those that are not, the metropolitan versus regional divide or higher-end households spending significantly more than middle and low ncome households.
While retail spending was strong in 2007, not all parts of Australia enjoyed the good growth they say. NSW and Victoria have lagged the other states. In addition, rural and regional areas have suffered despite demographic trends favouring population growth in those areas.
Major Retailers want to be in Western Australia due to the fact that WA delivered 9.9% growth in calendar 2006 and a further 10.5% increase in 2007. What is hurting several retailer including the likes of Harvey Norman is their exposure to NSW.
CitGroup say that retailers with an over-exposure to NSW have suffered during the past few years. In 2006, growth was 4.4% and 6.4% in 2007, both below the national average however premium retailers still performed strongly in NSWbecause the State has more wealth andhigher income growth.
In 2009 CitiGroup expect retail spending growth to accelerate in regional Australia. Its exposure to both the mining and agricultural industries will lead to stronger income and population growth than for major metropolitan areas. They note that over the past three months, significant rain has fallen over many agricultural areas in the east coast of Australia. Additionally, agricultural commodity prices have soared – wheat prices are up 91% in the past year (in Australian dollars). Therefore, farmrelated income is expected to rise significantly in 2008 and 2009.