The government has done “a damn good job” getting tax rates cut according to the Australian Retailers’ Association (ARA), and the savings will combine with lower interest rates and increased wages to boost consumer spending.
“There’s a bit more certainty,” states ARA executive director Russell Zimmerman in an interview with ChannelNews.
“One of the biggest things retail needs is confidence.”
The $158 billion income tax cuts package the Morrison government took to the election passed the Senate last night, with only the Greens attempting to block the bill.
While the cuts may take a month or more to have an effect, Mr Zimmerman said they’re not the only factor in boosting consumer confidence.
“We’ve had two interest rate cuts by the banks so that will help retail, we’ve just had a 3 per cent minimum wage increase come through…I think a lot of this will give confidence.”
Mr Zimmerman said the cuts will provide welcome relief to people who had put off spending, even on things they desperately need.
“The tax cuts will help those who have been doing it tough — and there are a lot of people doing it pretty tough — as the tax cuts come through people will spend money on things they need and have probably withheld buying for some time.”
Despite concerns tax and interest rate cuts would be given back to the banks by Australians coping with record household debt, Mr Zimmerman said this won’t get in the way of consumer spending, especially from younger Australians.
“Young people with mortgages spend, more senior people who rely on interest rates to supplement their income are obviously going to lose income, and they’re less likely to spend that money than the young ones who need to buy stuff.”
“The people who have got a mortgage are generally those people who are spending money, they want to put in new furniture, they want to get bits and pieces for their home and do stuff around the house, the interest rate cut will allow them to do that.”
Mr Zimmerman said uncertainty surrounding the recent elections was partially to blame for poor retail sales figures earlier in the year, and recent, albeit small positive growth in May was a sign of further growth to come.
“The whole month of April we were in election mode, New South Wales had just come out of an election and were going into a federal election, elections cause people to put their wallet back in their pocket and not spend.”
“Hopefully as we get to the June/July figures and then into August we’ll start to see some uptick.”
Mr Zimmerman said recent claims by the National Australia Bank that Australia was in the midst of a retail recession were inaccurate.
“We had one month where retail figures went down,” Mr Zimmerman said. “May figures are back up in positive territory”.
“The government’s done a damn good job getting these tax rates reduced and I think that will assist, I really do.”
