The increasing pressure on the Australian retail landscape from international retailers has been profound, said to the Reserve Bank of Australia.
In an address to the Ai Group on Friday, RBA assistant governor Luci Ellis said that, for a long time, retail prices tended to rise at roughly the same rate as inflation. However, the past decade has seen these prices either flat or falling, while inflation continued to rise.
“It wasn’t so long ago that Australia’s retail landscape looked very different, with few of the global retailers that populated the shopping centres of shopping centres of large cities overseas,” Ellis said.
“That has changed over the past decade, especially in groceries and clothing retail.”
The last decade has seen Australian consumers introduced to many international brands – Aldi, Amazon, H&M, Zara and Costco, to name a few.
The outcome of this – lower prices and higher competition –is not lost on the RBA, which questions how long this shift will last as it compiles inflation forecasts.
Ellis defined this issue as a ‘wave’ – a large, long-lasting and often structural force that shifts the economy, or a market, from one state to another.
‘If it’s a wave, it might represent a change in trend. Often the economy needs to transition to that new trend or new normal. It might not be obvious exactly where that new end-point is, or how long that transition will take,” Ellis said.
“Waves are in many ways the hardest [economic issues]. By definition, they persist for some time, so you know you need to take them into account in your view of the outlook, even if you didn’t anticipate their beginnings.”
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