Forget the facts - it's going to get tough says Australia's perpetually pessimistic forecaster Access Economics.

The doom merchants issued a report overnight proclaiming retailers can expect a tough 18 months ahead as the federal government's policy stimulus fades and growth in household income weakens.

The timing of their prediction is no coincidence - the Australian Bureau of Statistics will this morning release the latest retail trade report - covering July.

While Inside Retailing does not profess to listing any economists amongst its staffing roll, we cannot comprehend why Access continues to defy trading statistics that have been released.

Just yesterday we reported a retail employment outlook suggesting retailers would boost staff numbers. And our lead story online that 46 per cent of businesses were expecting sales to increase in the last quarter of this year.

In its latest 'Retail Forecasts' released Wednesday, Access argues that while most economic indicators were in negative territory, retail sales climbed 6.5 per cent between November 2008 and May 2009, supported by the weight of the government's "cash splash".

"Enough money was handed out and a good share of the windfall - at least half - has been spent," Access Economics director David Rumbens said releasing the report.

Then Access fell into the old trap of quoting month on month trends - utterly meaningless as every retailer knows, and widely used by mainstream news media for their headline qualities despite their irrelevance. Access said June retail sales were down 1.4 per cent. In fact they were up around seven per cent on June 2008, the figure that tells the full story.

"There is every chance the level of retail spending will step down further in the short term as spending stops being underpinned by policy and returns to being driven by underlying income growth, which remains relatively weak," Rumbens said.

"Employment may not be falling much but it is not rising either and the average number of hours worked by employees is falling which will cut into underlying incomes."

At the same time, the Reserve Bank of Australia has signalled that the next move in official interest rates is likely to be up, and it may occur before the unemployment rate peaks.

The next federal budget may also include some decisions which will allow budget balance to be restored in a reasonable period.

"That means belt tightening from the Feds which will flow through to wider incomes," he said.

However, there are positives for households from a recovering share market, rising house prices and broader consumer confidence.

Even so, Access is forecasting real - or inflation-adjusted - retail sales to grow by just one per cent in 2009/10 and by a more modest 0.8 per cent in 2010/11, before stronger growth of 3.7 per cent finally returns in 2011/12.

"In large part the magnificent retail performance of recent months has been borrowed from the future," Rumbens said.

He said there had been "good results" across most states but Western Australia was the key exception, showing only 0.3 per cent real retail sales growth due to an overhang of weak house prices.

"However, the prospect of Gorgon and other resource developments returning sooner rather than later will provide a boost to the West," he said.

The stronger the global economy and the return to commodity price strength, the more likely that retail, in what he describes as the "sun belt" - WA, Queensland and the Northern Territory - will start to outperform again going forward.

"For the next year, however, we expect retail in all states to be fairly subdued as the withdrawal of policy stimulus has an effect across the board."

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