Retail’s Budget fallout


Budget cuts symbolRetail appears to have emerged from last night’s Federal Budget announcement relatively unscathed, although industry heads have voiced some minor concerns.

While overall the budget delivered was a tough budget, it is unlikely to significantly negatively impact business.

The impact on consumer confidence of funding cuts across a number of sectors is perhaps the biggest worry for retailers, although several other issues, such as the increased fuel excise and other taxes may lead to further erosion of discretionary incomes.

Margy Osmond, CEO of the Australian National Retailers’ Association (ANRA) said retail is ultimately exposed to fluctuations in consumer sentiment as well as the general level of spending.

“Retail sales have been gradually growing for eleven consecutive months and retailers are concerned that the Budget will reverse these gains and erode consumer confidence at a critical time,” said Osmond.

“The increase in fuel excisewill generate a multitude of cost pressures for retailers – including rising transportation and freight costs as well as a hit to consumers’ hip pockets.

“In the longer term the dedicated road infrastructure investment will provide a better transport network to large scale logistic operators like retailers. The jobs associated with this infrastructure will also mean a brighter future for a number of communities and their retail businesses.”

Australian Retailers Association (ARA) executive director, Russell Zimmerman, holds similar sentiments to ANRA, saying that while the ARA supports the Government’s reduction in spending, there are concerns over the impact that increased taxes will have on consumer spending and confidence.

“We are only just beginning to see retail and the services sector regain momentum after many years in the doldrums. It would be a travesty if these tax increases impacted on that recovery to the sector and the services economy,” said Zimmerman.

“The ARA commends the Government on reducing the long term blow-out in Government expenditure through a solid plan which will see supply chain improvements and efficiencies through infrastructure spend.

“The ARA was also pleased to hear $1 billion p.a in red tape will be removed – allowing retailers to get on with the job of doing business.

“We are still waiting, however, for a decision to be finalised on removal of the low value GST exemption for overseas goods under $1000.

“Overall, this budget does deliver much needed structural change. What we need to see now is every effort made not to harm consumer confidence further with a clear long term plan from Government to support consumers through future tax cuts and short term support from agencies such as the RBA,” Zimmerman said.

Jeff Rogut, CEO of the Australasian Association of Convenience Stores (AACS), was less than pleased with the fuel excise raise.

“Fuel is already a very low margin product for petrol station retailers, who, for all their efforts and hours worked, make far less revenue than the Government on this product,” Rogut said.

“Competitively priced fuel also encourages merchandise sales for these small businesses when customers visit the store. These additional sales are crucial to the profitability and even viability of some of these stores.”

Other initiatives that reduce disposable income, such as the Budget Repair Levy, are also expected to be frowned on by the retail sector.

Joe Hockey calls it a “Contribute and Build Budget”.  He’s looking for business to help drive the economy and create new jobs. It’s not all doom and gloom with some measures that will help the disposable income of some. Changes to the Family Tax Benefit Part B would mean extra income for some families.

Accountancy and advisory firm, Grant Thornton says the scheme for encouraging employment of Australians over the age of 50 year may mean they find jobs in retail.

“While many retailers would love to have more experienced and mature store staff, quite a bit of training to help people re-skill for retail is required,” said Simon Trivett, national head of retail at Grant Thornton.

Changes to the Family Tax Benefit Part B will also mean extra income for some families.

“Talk of a budget emergency was somewhat inconsistent with the messages coming out of the RBA when reviewing cash rates and this could be confusing for consumers.

“Hopefully we see things settle down and the promising growth in retail over the last few months will continue,” Trivett said.

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