Forget a retail boom, Aussies will spend their tax-cut dollars at sea

tax cuts

In mid-2009, early in the global financial crisis, the Australian government mailed out tens of millions of $900 cheques – $8 billion worth in fact. In hindsight, it was one of the many brave things that governments were doing worldwide to prevent our global economy from stagnating. It worked and millions of shoppers went to stores, as we did back then, and allegedly bought flat panel televisions.

These were new, shiny and expensive and were wanted by shoppers who were mid-stride upgrading from old-style TVs. In reality, all retail figures bumped up, especially bottle shops and pubs. And why wouldn’t you celebrate with a drink or two with your free money?

In 2019, we have just passed significant tax savings which will feed into the economy and, it is assumed, will once again drive a huge retail rush to help our large declining engine room of suburban jobs. Sadly, I don’t think it will. It’s 2019, not 2009. That ship’s sailed. I’ll come back to that later.

In 2019, we are trailing other economies that went through true pain in the 2008 to 2012 GFC. We didn’t feel pain, cosseted as we were by shiploads of iron ore and coal heading north to China and India. We had a strong economy, stronger retail sales, higher interest rates and a very strong AU dollar. Life in Oz was not just good, it was top of the world order.

Things are different in 2019. Sure, we’re again being helped by iron ore prices but our job rates are stagnating. In the physical retail sector, I truly believe we are technically in recession with only job losses being experienced across the entire retail sector. In top-line dollars, sales via bricks and mortar stores are in a long and continuous decline. We are closing stores, no longer opening as many new stores, and still washing through deeply discounted excess stock in many of our national retailers – some of that stock is 3 years old.

All is not well in the land of physical retail whilst over the fence, the green grass of online retailing continues to grow. In fact, we are where the US and UK were three years ago. Our next phase in the transition is to close out the remaining poor performing stores and invest heavily in technology to drive productivity.

But back to the present. So, if our retail stores aren’t going to see a huge increase in sales revenue off the back of tax cuts, where is all the money going to go? Well, with a low AU dollar and low interest rates, not as much will go into international air travel. Cruise ships though? Well, they’re going to keep sailing at an ever-increasing rate.

Now that new infrastructure is in Sydney, Brisbane and other key ports, our deep passion for saltwater will attract a good proportion of those tax cuts. It’s not a bad thing, just not much help to retail stores.

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Jeremy Britton
Jeremy Britton
2 years ago

Retail gives a short-term bump to the economy but does not help longer-term. What would happen if millions of Aussies put their $1080 cheques into longer investments such as cryptocurrency or stocks?

2 years ago

The serious issue with the handouts program of 2008/09 is that the money had to be borrowed to give it to people who spent it in Bali or on other non essentials. Borrowing is not a good idea when the country had just gone through several years of belt tightening in order to pay off the country’s debt. Kind of like clearing your credit card debt only to splurge big on unproductive feel-good items while holding back no reserves so needing to make minimum only payments. Needing to pay off debt (personal or national) wastes valuable funds on interest that could be used to build/maintain infrastructure to create jobs and fund projects to meet a long term vision. Oh, that’s right, we don’t have a long term vision. BUT we also are close to once again paying off the country’s debt. Let’s not blow this opportunity to actually do that and free up those hundreds of millions of dollars Australia wastes every month paying interest on borrowed money. Tax cuts shouldn’t be about the retail industry; after all, they whacked GST on low cost imported items just to fix the retail industry. And of course it didn’t do that as it wasn’t the real issue.