Page 921 - Week 04 - Wednesday, 21 April 2021
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In the retail economy, retail turnover, which makes up around 30 per cent of household consumption, grew in nominal terms by nearly 15 per cent—14.9 per cent over the year to February—an increase of 8.6 per cent over the year to December that was reflected in the budget. It was even stronger retail expenditure than we anticipated at budget time. Since the budget’s release, household consumption in the ACT increased by 4.2 per cent in volume terms in the December quarter, and significant growth in areas outside the retail industry was also observed.
To put some context around this, I have delved a little bit deeper into the retail trade figures and can advise the Assembly that, across the measured sectors in the ABS data over the year, food retailing is up 7.6 per cent in the ACT; household goods are up a whopping 27.8 per cent; clothing, footwear and personal accessory retail are up 26½ per cent; department stores are up nearly 14 per cent; and other retailing is up 16½ per cent. For a sector that did take a big hit in the middle of the pandemic, cafes, restaurants and takeaway food services are now up 12 per cent over the year.
What this is showing is a substitution effect. The money that households were spending on overseas travel, for example, has been redirected into expenditure in the domestic economy. Record low interest rates have also freed up a lot of cash for households whose incomes have not been affected by the pandemic, and that is the majority of households within the ACT, although there still remain some sectors of the economy where the economic rebound has been slower, not as strong or yet to happen, because they are still significantly impacted by COVID-19 measures. That sector is principally the internationally tradeable services sector—international tourism and international education services being the primary examples there.
On the dwelling investment and building approval side—the housing market—clearly, record low interest rates are fuelling an asset price bubble. That is basic economics. It is happening all over Australia, and indeed in many places around the world. The recovery in this sector has been faster than the government anticipated. What we are seeing, though, is a significant flow of investment into this sector. Dwelling investment increased 3.3 per cent in the December quarter, 1.5 per cent higher over the calendar year. That was driven by very strong growth in alterations and additions—renovations.
What has happened is that Canberra households have poured tens of millions of dollars into improving their properties. One of the other features that is flowing very strongly into the increase in house prices is that houses are bigger and better than they were because hundreds of millions of dollars are being poured into them through renovation projects.
The quality of Canberra housing, which was already the highest in the nation, has got even better as a result of households shifting their consumption away from internationally tradeable services like overseas holidays and spending it on their home. That is why retail outlets like Bunnings and others have had the most extraordinary 12 months of trading, often in their business’s history, and it is why we are seeing such an extraordinary demand on the renovation sector within the ACT. I am pleased to say that we have seen building approvals more than double over the year, which is
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