Tide turns for retailers with shop tills tipped to ring

Australian retailers can expect a rosier 2025 as interest rate cuts aid improving household finances and spark spending.

And an interest rate cut could really fire things up, Deloitte Access Economics partner David Rumbens says.

"A rate cut from the Reserve Bank of Australia, whenever that might be next year, could be the green 'go' light consumers need to see before feeling comfortable letting loose," Mr Rumbens said in a report.

After 18 months of patchy consumer spending, the advisory firm expects a 2.1 per cent lift in real retail turnover in 2025, to follow a 0.3 per cent decline in 2024.

While high borrowing costs and price pressures are still weighing on household budgets, tax cuts, energy bill support and real wage gains have provided cushioning.

National accounts on Wednesday confirmed most Australians have been using the extra cash to pay down mortgages and build up rainy day funds.

Yet there are signs shoppers have been waiting for sales, with the Australian Bureau of Statistics attributing an early start to Black Friday discounting to the sizeable 0.6 per cent lift in retail sales in October.

The bureau's broader household spending indicator similarly beat expectations and showcased more money flowing into discretionaries, such as recreation.

Mr Rumbens said consumers were starting to shift from saving to spending, particularly if there were bargains to be bagged.

"We've seen this in a much earlier uplift in searches for 'sales' in Google trends data compared to 2023," he said.

"The tide is turning."

The upcoming federal election and trade tensions under a second Trump administration were flagged as risks to the outlook.

The "discount dilemma" - where customers grow accustomed to sales and become reluctant to pay full price, damaging profit margins - was another concern.

The timing of the consumer recovery was a risk factor as well, especially given it may take interest rate cuts to prod consumers into spending mode.

Indeed, the RBA has repeatedly flagged consumer behaviour as a source of uncertainty as it battles underlying price pressures.

While too much weakness in the consumer sector risks hurting the economy and jobs market, weaker demand and a slower economy is part of the central bank's plan to bring inflation to heel.

The RBA board is due to meet next week but chances of a December interest rate cut are slim, with financial markets fully pricing in a cut by April next year.

Economic teams at NAB, Westpac and ANZ are now tipping May for easing to start, with Commonwealth Bank pencilling in February.