Budget: Short Term Boon, Long Term Bust?

Natasha Sholl By Natasha Sholl | 04 Apr 2019

Do the latest figures encourage retailers or create more long-term problems? The stats are in, but it depends which way you look at them.

The retail sector has had a positive response following key announcements in the Federal Budget. Recent ABS results all point to an upwards trajectory. But while tax cuts and an increase in discretionary spending is a positive for online retailers, are we missing the big picture?

National Retail Association CEO Dominique Lamb said the news regarding both the budget and February sales results serve as welcome relief for retailers. “The 2019 Budget takes keys steps towards helping Australia’s retail sector, which has so far experienced a slow start to the year,” Lamb said.

“The tax cuts for low and middle-income earners will mean that ordinary Australian’s will now have more money in their hip pocket to spend at the shops,” said Lamb. “The need to restore consumer confidence was vital and these tax breaks will go a long way to achieving that.”

“The government’s move to raise the tax offset for PAYG taxpayers, putting up to $1,080 in the pockets of singles and up to $2,160 for dual-income families – increasing actual purchasing power – means Australians can spend with confidence, delivering a boost to local businesses,” added Russell Zimmerman, Executive Director of the Australian Retailers’ Association.

The announcement that instant write-off provisions would be increased from $25,000 per purchase to $30,000, and expanded to cover every asset acquisition by businesses turning over up to $50m per annum, would further assist retail enterprises at a time of difficult trading conditions, the ARA said.

“In a rapidly evolving environment compounded by challenges from online overseas retailers, high energy prices and uncertain economic conditions, this will help Australian retailers modernise and update to ensure they are well equipped to compete and grow,” Zimmerman said.

But while the boost to small business seems encouraging, questions have been raised about the impact of Federal Budget on start-ups and innovation with a $4 billion cut to the research and development tax break over the last two budgets.

“It’s budgets like this one that force us question whether we should tell other founders to start a business here,” co-founder of video production start-up Shootsta, Tim Moylan, told The Australian Financial Review. Others in the tech industry have raised similar concerns about a failure to see the big picture when it comes to innovation in Australia.

The ABS also released its retail trade report for February 2019 earlier this week which shows that retail sales increased by 0.8 per cent.

“The latest retail trade figures, viewed overall, are pleasing, but they are likely to have been affected by a number of one-off and seasonal factors,” said Zimmerman. These factors include spend in relation to new season items heading into colder months as well as necessities purchased in relation to floods and droughts across the country.

“While there are some fluctuations in today’s figures in discretionary spending categories – where turnover may have declined month-on-month but remains higher compared to this time last year – the bottom line in these numbers is that consumers continue to spend with confidence, which is great for businesses in the retail sector,” Zimmerman concluded

“The ABS sales figures for February are the largest monthly increase since November 2017 and indicate that consumer confidence is heading in the right direction,” Lamb said.

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