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Budget delivers boost to retail spending

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Inside Franchise Business: retail spending gets a boost in the 2018 budgetHas the budget delivered for small business?

Mary Aldred, CEO of the Franchise Council of Australia, has welcomed a number of budget announcements that encourage business to continue to invest.

  • Continuation of the $20,000 business asset right off for businesses with an annual turnover of up to $10 million
  • Reducing the small business tax rate over time to 25 per cent
  • Increasing tax incentives for business R&D

Australian Retailers Association executive director Russell Zimmerman said the budget was “fairly good” and stands to stimulate spending.

“It will stimulate the economy a little bit, hopefully that will increase spending,” he said. “Bigger tax cuts would have been better but it is what’s affordable.”

National Retailers Association chief executive Dominique Lamb welcomed the tax cuts.

“The more money that ordinary Australians have in their back pocket the more money they have to spend on items ranging from groceries to personal accessories and clothing,” she said.

The Turnbull Government will look to deliver $13.4 billion to the hip pockets of Australian consumers over the forward estimates under tax reforms outlined in the Federal Budget on Tuesday night.

More than four million low and middle-income earners will save up to $530 per annum under the plan, which will begin to be phased in by 1 July 2018 and has bipartisan support.

Employer groups say the policy will likely provide a much-needed shot in the arm to retail spending across the country.

The budget also delivered a funding boost for at-home aged care services. The budget outlined a $1.6 billion provision over four years to allow 14,000 seniors to access at-home care services rather than move into nursing homes.

Wage growth outlook

Wage growth of two per cent is expected in 2017-18, increasing to 2.25 per cent in 2018-19 before increasing again to 3.25 per cent in 2019-20, where it is projected to stabilise over the remainder of the forward estimates.

ANZ economists said the government’s broader revenue numbers are “generally credible” but that wage growth projections were optimistic.

“The forecasts for wages continue to be particularly optimistic … we think that 3.25 per cent by 2019-20 seems particularly ambitious given that the WPI [wage price index] is currently running at just 2.1 per cent,” they said.

ANZ has forecast wage price index growth of 2.3 per cent in 2018-19 and 2.6 per cent in 2019-20.

“There is quite significant spare capacity still in the labour market and, globally, the Philips curve seems to be much flatter, which means there is less upward pressure on wages as unemployment falls,” the ANZ economists said.

Real GDP is forecast to grow by 2.75 per cent in 2017-18 before increasing to three per cent each year over the remainder of the forward estimates.

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