Retailers hopeful as the dollar tumbles and budget funding increases

The falling Australian dollar combined with a boost in funding for low to middle-income households in the federal budget are “good news” for retailers according to retail specialists, the Retail Doctor.

The good news keeps on coming with the release this week of the latest Australian Bureau of Statistics retail trade figures which reflect a rise in Australian retail turnover of 0.9% in March following a rise of 0.3% in February 2012.

The largest contributor to the rise was food retailing with an increase of 0.9%, followed by cafes, restaurants and takeaway food services at 2% and clothing, footwear and personal accessory retailing recording a 1.6% increase.

The Australian Retailers Association has highlighted the budget measures that may benefit retailers as including small business being able to immediately deduct asset costs under $6,500, the extension of the Small Business Advisory Service and the relief provided to low to middle-income households through Family Tax A and the Schoolkids Bonus.

Brian Walker, retail specialist at the Retail Doctor, told SmartCompany consumers continued to be very cautious in what was a tight economic cycle and the extra money for low- and middle-income families was a boon for retailers.

“From a consumer point of view, retail spending still sits behind the need to pay for rising utility costs, so it is good news for retailers as it frees some money up, but I don’t see it going into retailers’ pockets yet,” says Walker.

“Any interest rate fall is good news to retail, but we do look to the banks to let go of it.

“I am cautiously optimistic about the economy, but there are enough small signs to say that we are starting the road back.”

Walker says retailers will feel the impact of the Australian dollar’s slide towards parity with the US dollar; which began at the end of last month as the market began factoring in a Reserve Bank rate cut and accelerated following the 0.5% cut and more bad news from Europe on sovereign debt.

He says the lower dollar lifts the prices of imports, giving local competitors a leg-up, making retailers more competitive.

“The interesting thing here is that has an impact online as well,” says Walker.

“The common theme is that there is good news for retailers out there but certain other conditions have to occur as well.”

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