Retailers offer mixed response to Federal Budget

Posted by Daniel Palmer on 13th May 2009

The 2009-2010 Federal Budget takes a long-term and hopeful view of Australia’s powers of recovery. It is a ‘dig deep and hope the recession ends soon’ approach, according to the Australian National Retailer’s Association (ANRA) – which represents major retailers including Coles, Woolworths and Franklins.

“In a climate of confused and dramatically altered consumer confidence, retailers needed to see initiatives to stimulate the flagging optimism of Australians,” ANRA CEO Margy Osmond said. “This Budget delivers the promised tax cuts and an increase in pensions on the back of the earlier stimulus packages and this is a welcomed prospect for sustained additional spending.”

“However, some measures including belt tightening on family payments and changes to the private health insurance rebate will be a bitter pill for many families,” she suggested. “Most importantly, the frightening forecast of 8.5 per cent unemployment will still be playing on the minds of consumers and could lead to the slashing of retail sales by as much as $2.5 billion.”

“This contraction could cancel out the boost provided by the Government’s second round of cash handouts prior to the Budget.”

ANRA did, however, welcome the Government funded paternity leave scheme, $22 billion in infrastructure spending particularly roads, extra training places, extension by six months of the First Home Owners boost and increases in the singles and couple pension.ARA response
Peak retail industry body for small and medium enterprises, the Australian Retailers Association (ARA), said the Federal Budget was big on nation building but small on business building, with little focus on job retention or job creation outside of infrastructure jobs.

ARA Executive Director Richard Evans believes that, while nation building is good for Australia and construction jobs, it’s not focused on the challenge of saving jobs within the supply channel for the here and now.

“Employment stability is the key to domestic economic recovery and the Rudd Government’s second budget does little to sure up job confidence for the average worker and nothing to provide incentive for small business to maintain current workforce levels,” Mr Evans said. “Retail budgeting 101 states that if recurrent revenues decline then recurrent spending should also be reduced. We see little evidence of this in the Federal Budget with the Government failing to make the hard decisions to reign in their spending.”

Mr Evans contends that the picture painted by the Federal Government might be a little too rosy.

“What we are seeing here is a Government spending more than is being earned,” Mr Evans argued. “If a retailer were to budget with the optimistic forecasting techniques and declining revenues being used by the Government, it would be rejected by their bankers under the current protocols set by them.”

“That being said, we do applaud the boost from 30 to 50 per cent of the Small Business Tax Break and the extension to the end of December 2009,” he stated. “This extra incentive for smaller business (turnover of less than $2 million) to purchase eligible assets will stimulate business investment spend if demand, and thus cash to actually pay for the investment, returns.”

“In terms of the increase to the pension – the ARA supports the move but sees it as too selective. Young people in this budget have been left behind. And without direct stimulus and support to the retail sector – a large employer of young people – the ARA sees youth unemployment under direct pressure,” Mr Evans concluded.

The response of food and grocery manufacturers can be found by clicking here.