Australian retailers reportedly expect most individuals to spend, not save, their income tax cuts, especially in the lead up to the holiday season.
Reported by AFR, Citigroup forecasts personal tax cuts could boost retail sales by 1.5% – 2.5%, potentially prompting retailers’ earning to climb by 3% – 7%.
The income tax cuts are worth around $12.5 billion this year, coupled with an additional $2.5 billion in pensioner payments – equating to around $20 – $40 a week for eligible recipients.
Some analysts expect consumers to spend the tax cuts in the lead up to Christmas, before opting for saving and debt reduction in the near year.
Regional travel during the holiday season is also expected to enhance the spending of consumers, with some forecasting consumer sentiment to ‘treat oneself’ following the hardships of 2020.
Many local business people have praised the tax breaks for helping to lift sentiment in the lead up to Christmas.
Citigroup has maintained a cautious attitude on retail sales outlook for next year.
Measures to write off 100% of capital investment is are also poised to significantly lift retailer’s operating cash flow – some expecting by up to 10%.
