We had high hopes for this year’s Federal Budget, delivered in the midst of major challenges to the retail landscape, including weaker retail sales over three of the past four quarters, and an ever-increasing influx of overseas competitors.
Despite it following the tough medicine approach of 2014 that sent shockwaves through retail, and the next two years’ Budgets that struggled to rein in spending without major impacts on discretionary spending, Budget 2017 overall is nothing to write home about.
There are a few measures outlined that are very good for business however, as tax cuts and extended accelerated depreciation are definitely welcome to retailers.
The Government’s deal to secure company tax cuts for more than three million small and medium businesses is a move designed to stimulate growth and employment across the nation, and it’s one that will particularly resonate with retailers.
Additionally, small business owners with annual sales under $10 million (up from $2 million last Budget) will get another year to claim an upfront tax deduction for assets up to $20,000.
There’s also a $300 million incentive to the states to reduce regulatory restrictions on competition and small business, but that’s pretty much the long and the short of it for retailers, hopeful for stronger measures to increase household income growth.
As one of the most gendered industries, and one that employs the highest number of young people in the country, we’re also pleased to welcome changes to extended childcare rebates.
Citigroup estimates the average household will be about $55 a year better off in 2018 and 2019, as measures including the ones outlined above, offset changes to family benefits, higher tobacco excises, higher university fees and GST being applied to overseas online purchases.
But Citigroup’s modelling shows if households were to spend those small savings, it would boost retail by about 0.2 per cent.
And that’s not taking into account an increase to the Medicare tax of 0.5 per cent in 2020, set to cost households an extra $3 billion.
One of the most significant measures, a new levy on the Big Five banks, could have the most lasting and negative impacts on household spending over the longer term.
If the Federal Government achieves this measure (although Commonwealth, NAB, ANZ, Westpac and Macquarie Group won’t be taking this move lying down) it’s fairly safe to assume the banks would pass the $6.2 billion bill directly to consumers, creating a counter-effect likely to stagnate retail even further.
Budget 2017 is a far cry from the politically toxic, Tony Abbott/Joe Hockey “lifters and leaners” fiasco, and we’re grateful for the absence of shockwave measures we’ve seen in years gone by, however this is a Budget that’s fallen a little short for retailers.
Have a great week.
Dominique Lamb
CEO