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Budget regurgitates old initiatives, says ARA

May 11, 2011: The Australian Retailers Association (ARA) says small business would feel ripped off after mostly ‘recycled’ initiatives disguised as new small business investment incentives were announced in the 2011 Federal Budget last night.

ARA executive director Russell Zimmerman (pictured right) said there was no real relief to retailer business costs or red tape, and no new incentives for business investment.

‘The reduction in the company tax rate to 29 per cent for incorporated small businesses as well as the tax write-offs for assets under $5000 were announced firstly as part of the Henry Tax Review and then again in last year’s budget announcement.

‘These small business incentives have now been recycled twice over – there’s not much that is new for retail in the 2011 Federal Budget announcement.

‘The immediate write-off of the first $5000 on the purchase of any motor vehicle is good news for retailers but incentives for investment in other areas of business would have received a greater welcome. Moreover, businesses won’t be able to claim the write-off until the 2013/2014 financial year, but retailers need some relief now.

‘As the changing market place is demanding Australian retailers deliver online shopping facilities, there is nothing in this budget that gives incentive for retailers to invest in the training or the infrastructure they need to provide best practice online service to Australian customers.

‘…The phasing out the Dependent Spouse Tax Offset will take cash away from working families. This is more bad news for the retail sector with affected families expected to further reduce their spending.

‘Changes to quarterly PAYG instalments will mean little for retailers who mostly lodge PAYG monthly.’

(The GDP multiplier for this year will set at 4 percent. While this is an increase from the 2 percent rate set during the past two years, the rate had been set to jump to 8 percent this year. The return to an 8 percent level will now occur next year.)

Interest rate rethink?

‘With retail figures released last week for March dropping 0.5%, retailers are hoping spending cuts in the Budget are enough for the Reserve Bank to hold back on rate rises for the time being,’ Zimmerman said.

Margie Osmond, CEO of the Australian National Retailers Association, the group which represents Australia’s larger retail chains, largely concurred with the ARA.

‘Retail has been the big loser of the last 18 months and we know that with average readings for consumer confidence and willingness to spend at a 20-year low, there is little in this Budget to relieve the gloom for this sector,’ Ms Osmond said.

‘Retailers are keeping a watching brief on the Reserve Bank, which has outlined a case for a rate rise post-Budget; this would impact significantly on the discretionary spending behaviour of your average Aussie.

‘If there is a positive to be taken from this Budget for retail at all, perhaps the restrained response by the Federal Government to the need for real retail stimulus may give the RBA reason to pause before flicking the ‘up’ switch on rates next month,” she said.

‘All in all it’s a non-result for the retail sector and we hope the Government will deliver some much needed good news for the sector when it comments on the Productivity Commission Inquiry later this year,’ she said.

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