Australian Retail Gloom May Lift on Rate Cuts, Deloitte Says

Australia’s retail “gloom” may be starting to recede after the central bank slashed the benchmark interest rate by 1.25 percentage points over the past eight months, a Deloitte Access Economics report showed.

“Those cuts will free up a substantial chunk of disposable income,” the Canberra-based research company said in a report released today. Government spending measures including payments for school-age children and extra welfare spending may also provide a “sugar hit” to the retail industry, it said.

Ebbing consumer confidence and declining prices prompted Myer Holdings Ltd. (MYR), the country’s largest listed department store company, to forecast a 15 percent decline in net income in the year through July. Australian households are saving money at more than twice the rate of their U.S. counterparts. In nine of the past 12 months, pessimists have outnumbered optimists in Westpac Banking Corp. (WBC) surveys.

“Overall, we expect that interest-rate cuts and budget handouts will help the retail sector continue some upward momentum in the coming months,” the report showed. “Real wages growth is picking up, which may also help sustain retail growth at a reasonable level over 2012 and into 2013.”

Deloitte said risks to its forecast remain high, as threats to the global economy keep business and consumer confidence fragile and because of wealth losses due to weaker share markets and house prices.

To contact the reporter on this story: Michael Heath in Sydney at mheath1@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

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