The ‘election effect’ and retail
Election years are synonymous with periods of instability in the business community. Businesses tend to err on the side of caution, taking a ‘wait and see’ approach to making strategic decisions, particularly when it comes to major investments and recruitment, until after policy uncertainties are resolved post-election.
The actual impact of an election on employment and investment in an election year can come down to a number of factors, however is influenced by the predictability of an election result, whether the incumbent is favoured to win and whether the front-runner is deemed more ‘market friendly’.
So, what’s happening in the retail sector?
With recruitment widely regarded as an indicator of market confidence, as the election campaign ramps up, there has been a remarkable difference in what we’re hearing and seeing this time around compared to previous federal elections.
Looking back on the last federal election, and the one prior to that, there were circumstances in both years that intensified the impact the election had on the retail sector. In 2010 Australia was recovering from the GFC, and in 2013, turmoil in the ALP government of the day left the industry in limbo.
But as we head towards the July 2 election day, there appears to be an unusual calm amongst retailers, with consumer and business confidence expected to remain stable. In fact, the 2016 election campaign looks likely to have little impact on the decisions of retailers – and in some circles is being referred to as a non-event.
General consensus from the industry has been overwhelmingly ‘business as usual’, as retailers head into what is traditionally the busiest time of year from a recruitment perspective. The election comes at a time when retailers are focused on making broader business decisions around company structures, new opportunities and new employees, allowing time to firm up changes well ahead of the festive season.
The unusual calm could also be partly attributed to the recently released federal budget and the move to bring spending under control while announcing company tax cuts for SMEs and personal tax cuts for consumers. These cuts, combined with plans to offset bracket creep through personal tax threshold changes, have been welcomed as a boost for consumer confidence and spending. The recent RBA interest rate cut will also fuel a more positive outlook, with many retailers suggesting there will be minimal, if any, deferral of investment in capital expenditure or employment while they wait for an election result.
But this is not to say it’s been all roses for the retail sector. Seasonally adjusted monthly retail trade figures (month-on-month) reported by the Australian Bureau of Statistics have shown year-on-year retail sales sitting at 3.6 per cent, which is soft. But this pattern cannot be attributed to the impending federal election alone and there is little sign of the slowdown we have seen in the previous two election years.
So although experience tells us that the ‘election effect’ on retail can be very real, from an employment perspective, we’re anticipating seeing a consistent pattern for the remainder of 2016. With a glass half-full, here’s to a positive year ahead in retail.
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