We are in a long grinding cycle for retailers as debt deleveraging in the household sector continues

We are in a long grinding cycle for retailers as debt deleveraging in the household sector continues. On one hand we have weak household income growth and poor demographics (older people spend less) while on the other hand we have strong population growth supporting aggregate spending - so on balance we would expect growth in retail spending will be very modest but at least positive. As with many aspects of business in Australia, our country is an expensive retail destination. It is expensive to set up, fit out and stock a store in Australia not to mention rents which are very high. This leaves Australian retailers particularly vulnerable to online penetration which will be ongoing. There has been a lot of new supply also in recent years and Australia is popular with international retailers eager to get into this market, none of this is good for established retailers.