Retail and wholesale trade

Outlook

Retail trade is expected to grow in 2021-22 and wholesale trade is anticipated to benefit from an improvement in private investment activity. The improved outlook for economic and population growth will support the industries over the forward estimates period, but will be constrained by expectations of modest wage growth.

In 2020-21, the Territory retail and wholesale trade sector increased by 10.1% to $1.6 billion (Chart 10), accounting for 6.5% of the Territory’s GSP. This increase was driven by consumers changing their shopping behaviour in response to COVID‑19 restrictions, and businesses taking advantage of government incentives. However, the number of people employed in the sector decreased by 8.8% to around 13,000 persons in 2020-21, which was 9.9% of total employment in the Territory. The sector’s contribution to GSP is relatively low compared with other jurisdictions and nationally (Chart 11), reflecting the dominance of the government and community services, mining and manufacturing, and construction sectors in the Territory.

It is anticipated that the retail and wholesale trade sector will return to modest growth over the medium term as more typical economic conditions prevail and activity becomes more aligned with the fundamental demand drivers such as interest rates, population, employment, disposable income, consumer sentiment and the level of household debt. Modest wages growth over the outlook period is also expected to constrain growth in household consumption and retail turnover. An ongoing challenge this sector faces is the shift by consumers to online purchases, which is expected to divert sales from domestic brick and mortar retailers to overseas merchants as the e‑Commerce sector grows.

In 2021‑22, household retail expenditure will be supported by the Commonwealth’s temporary one‑off cost of living tax offset and one‑off cost of living payment. The impact of these measures is expected to be small as they offset increased cost of living pressures. Closed international borders limiting long‑haul travel options for the majority of the year will continue to support some level of local spending.

Chart 10: Year-on-year change in the retail and wholesale trade sector

Chart 10: Year-on-year change in the retail and wholesale trade sector

Source: ABS, Australian National Accounts: State Accounts, Cat. No. 5220.0

Chart 11: Retail and wholesale trade share of GSP, GDP and employment, 2020-21

Chart 11: Retail and wholesale trade share of GSP, GDP and employment, 2020-2

GSP: gross state product; GDP: gross domestic product
1  Current prices.
2  Annual average.
Source: ABS, Australian National Accounts: State Accounts, Cat. No. 5220.0, Labour Force, Australia, Cat. No. 6291.0.55.003

Retail trade

Retail trade’s contribution to GSP increased by 8.2% to $741 million in 2020-21 as consumers were restricted in their ability to spend on household services over the course of the pandemic. The introduction of measures to help curb the spread of COVID-19, such as the closure of international and interstate borders, periodic lockdowns and trading restrictions (such as capacity limits), primarily affected the ability of the services sector to trade as normal and restricted avenues for discretionary spending. At the same time, goods retailers were comparatively unaffected by these restrictions and benefited from households’ inability to spend on services sector, leading to a sharp increase in spending on retail trade over the pandemic (Chart 12).

Chart 12: Quarterly Territory retail turnover (seasonally adjusted)

Chart 12: Quarterly Territory retail turnover

Source: ABS, Retail Trade, Australia, Cat. No. 8501.0

With the successful vaccine program over 2021 and early 2022, the removal of international and interstate border restrictions in early 2022, and positive business and consumer confidence, the short‑term outlook for the services sector has improved. Consequently, it is anticipated goods retailing will revert to pre-COVID-19 output levels in the short term. ABS data reports that retail turnover is showing signs of this moderation, with growth of 2.8% in 2021 compared with growth of 5.8% in 2020, and a further slowdown in growth is anticipated in the near term. Nationally, retail trade turnover increased by 3.5% in 2021, compared with growth of 2.7% in 2020, with the larger eastern states being more adversely affected by the initial COVID-19 response in 2020. Weakness was particularly evident in recent quarters. In annual terms, retail turnover fell by 1.9% in the December quarter 2021, the first decline since the pandemic started (Chart 13).

Chart 13: Annual change in retail turnover (seasonally adjusted)

Chart 13: Annual change in retail turnover

Source: ABS, Retail Trade, Australia, Cat. No. 8501.0

It is anticipated that a return to pre-COVID-19 consumption patterns and the return of services spending will negatively affect the outlook for goods retailing in the Territory. However, should households draw down on high levels of household savings established over the course of the pandemic at a faster-than-expected rate, this could provide some support for retail trade (Chart 14).

Chart 14: Quarterly Australian household savings ratio and quarterly change in Territory household consumption (seasonally adjusted)

Chart 14: Quarterly Australian household savings ratio and quarterly change in Territory household consumption (seasonally

Source: ABS, Australian National Accounts: National Income, Expenditure and Product, Cat. No. 5206.0

Over the medium term it is expected that a return to population growth, supported by the Territory’s pipeline of major project investment, will be the main driver of growth in retail turnover, although modest wage increases over the outlook period may constrain this to some degree.

Developments likely to support retail investment and turnover in the medium term include:

  • the Territory and Commonwealth governments’ $200 million commitment to the Darwin City Deal project to revitalise the CBD including the Darwin Education and Community Precinct, Civic and State Square Redevelopment and State Square Art Gallery
  • $135.5 million to redevelop Jabiru into a tourism and regional service hub
  • $23 million to revitalise Alice Springs, focusing on heat mitigation and enhancing community safety through environmental design.

In 2022, Casuarina Square was acquired by Sentinel Property Group which plans to develop the centre with a refurbishment of Woolworths in the short term and, in the long term, turning it into a town centre by building on the existing retail facility with residential developments.

Online retailing has been growing gradually and COVID-19 accelerated this shift as consumers turned to online shopping to comply with social-distancing measures and minimise health risks of in-store purchasing. Spending was also supported by pay-later innovations offered by outlets. With consumers becoming more familiar with online retailing due to COVID-19, this could impact traditional brick and mortar stores with retailing being diverted to online stores. Online sales in the Territory grew by 11.2% in 2021, following strong growth of 28.4% in 2020. Nationally, year-on‑year growth in online sales has slowed from 40.2% to 8.2% over the same period according to National Australia Bank’s online retail sales index in 2021. Online retailing expenditure is only partially captured in the ABS data, as it only reflects online retail sales by Australian retailers. E-commerce shops can be located in other jurisdictions or overseas, and therefore growth in online retail expenditure does not directly translate to growth in the retail industry in the Territory.

Wholesale trade

Wholesale trade’s contribution to economic output tends to move with major project investments, which require significant logistics support, particularly during construction. The outlook for wholesale trade is positive with increased private investment activity over the outlook period, and there is potential for greater growth if proposed major projects reach final investment decision.

Chart 15: Year‑on‑year change in wholesale trade

Chart 15: Year‑on‑year change in wholesale trade

Source: ABS, Australian National Accounts: State Accounts, Cat. No. 5220.0

Wholesale trade’s contribution to GSP increased by 11.9% to $837 million (Chart 15) in 2020-21, and it represents a higher proportion (53.9%) of the retail and wholesale trade sector for the Territory than nationally (48.9%).

The number of wholesale businesses operating in the Territory at the end of June 2021 increased by 5.1% to 327 compared with June 2020. The growth was driven by a 21.1% increase in grocery, liquor and tobacco product wholesaling businesses, followed by an 8.6% increase in machinery and equipment wholesaling businesses (Chart 16).

Chart 16: Number of wholesale businesses, by type

Chart 16: Number of wholesale businesses, by type

Source: ABS, Counts of Australian Businesses, including Entries and Exits, Cat. No. 8165.0

For the latest data on the retail and wholesale trade sector, refer to the Territory Economy website.