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Retailers to benefit from rate and tax cuts

After a challenging first half of the year, the announcement of a second consecutive interest rate cut and positive trading figures for the month of May have offered a ray of sunshine to retailers. Coupled with the passing of the Morrison Government’s tax cut package, the Australian Retailers Association (ARA) is looking forward to a more positive outlook as the industry enters FY19-20.

In a very welcome show of support for retailers, Parliament has passed the Morrison Government’s ambitious tax relief package in full.

Taxpayers are set to receive the first tranche of payments in the coming weeks and months, with $15 billion handed back for those filing returns for the financial year to 30 June 2019.

In particular, more than 10 million wage and salary earners are set to receive $1,080 as soon as their tax returns are processed, with a bonus of $255 for millions more lower-income taxpayers.

The extra money will kickstart the economy by increasing consumer confidence and stimulating retail expenditure, especially at local businesses and on discretionary items – the little luxuries, treats and household purchases many consumers have been putting off due to shaky economic conditions.

The ARA is delighted that the Australian Labor Party decided to pass the Coalition’s tax relief measures in full, signalling their support for retailers who have been doing it tough amid a ‘perfect storm’ of negative conditions.

High energy costs, increased online competition, penalty rates and falling consumer spending have all contributed to soft figures for the retail industry; however, Parliament’s steps to address the latter two of these challenges show that Canberra is aware of the industry’s concerns and willing to do the right thing by a sector that employs 10 per cent of the Australian workforce.

Rate cut to boost spending
"The extra money will kickstart the economy by increasing consumer confidence and stimulating retail expenditure, especially at local businesses"

The ARA welcomes the Reserve Bank of Australia (RBA)’s decision to cut official interest rates by 25 basis points for the second time in as many months, bringing the rate down to 1 per cent.

This change will deliver another shot in the arm for consumer spending, and help to stimulate economic activity. While some commentators have been alarmed at the cut, there is historical precedent for the RBA shifting interest rates in sets of two.

While the economic impacts won’t be immediately apparent, the cut will put money into the pockets of many Australians with mortgages – about $15 for every $100,000 owed. This money will be spent, keeping it circulating through the economy rather than flowing back to the bank in the form of savings.

With nearly six months of sluggish retail trade and tough economic conditions – both in Australia and globally – the rate cut is a welcome stimulus and will also exert downward pressure on the exchange rate, making it easier for traders to sell imported goods.

Solid trade figures

The month of May delivered slight growth for retailers after a disappointing April, likely the result of a post-election ‘bounce’ following suppressed spending during that time of political uncertainty. The Australian Bureau of Statistics (ABS) released figures showing reasonable annual growth of 2.44 per cent nationally, driven by healthy year-on-year increases of 4.75 per cent in Queensland and 4.21 per cent in Victoria.

Figures were flat across New South Wales, Tasmania and Western Australia, with middling gains in South Australia and the Australian Capital Territory.

The Northern Territory was the only sector to record negative growth for the month, at -4.28 per cent. Retail sales have undergone a protracted decline in the region and as a result, the ARA is calling on the Territory government to undertake measures to stimulate consumer confidence and activity as soon as possible.

Café and restaurant sales were again a major driver in the uptick, while electrical and household goods saw slight falls – which may be attributable to the late winter. The clothing, footwear and personal accessories category – of which jewellery is a part – grew 1.15 per cent year-on-year seasonally adjusted.

Crucially, more than half of the month of May was still impacted by the election, so it’s likely even more positive news will be announced when the June figures are available next month.

Russell Zimmerman

Russell Zimmerman is the executive director of the Australian Retailers Association (ARA). Email:

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