Budget’s $8.6bn cost of living package fails to address retail’s needs

The Government’s long awaited ‘election budget’ was released on Tuesday evening, committing $8.6 billion to ease the growing cost of living.

The package is aimed at cutting fuel prices by 22 cents per litre for the next six months, as well as giving low-and-middle income earners a tax bonus of $420.

Treasurer Josh Frydenberg also said the government is extending the instant asset write-off scheme to June 2023, which allows businesses with a turnover of up to $50 million to write off new assets. 

A 20 per cent text deduction for digital investments for small businesses, such as cybersecurity and web design, will also be implemented. 

According to National Retail Association chief executive Dominique Lamb, however, the budget failed to address the needs of the retail industry directly. 

“We welcome the budget’s investment in skills and enhancing digital capabilities, but retail is left without a long-term agenda to address economic resilience in the sector,” Lamb said.

While retailers are likely to benefit from the cost of living measures introduced in the budget through increased spending potential, the Government’s efforts are too focused on the now, she added.

“Consumer cash flow is the lifeblood of many small retail businesses, and fuel excise cuts and cash handouts will help counteract the steep revenue drop experienced at the beginning of the year,” Lamb said. 

“But, the budget failed to address the broader challenges of the economy by focusing heavily on short-term inflation relief.”

Australian Retailers Association CEO Paul Zahra largely agreed, stating that while the majority of Covid-19 trading restrictions have been removed, retail has yet to see a significant improvement in foot traffic – especially in CBD locations. 

“We cannot have an economic recovery without a retail recovery,” Zahra said. 

“Whilst retail overall is performing well, the business recovery remains elusive for some, including CBD retailers, travel retail, hair and beauty, hospitality and small businesses, who require a level of ongoing targeted support.”

Zahra welcomed the Government’s efforts to help women return to the workforce, including $346 million to improve paid parental leave, which will allow working parents to share up to 20 weeks of fully flexible leave.

However, the budget’s failure to meaningfully address climate change was disappointing to Zahra, who said that while the business community is taking positive steps, these need to be supported by greater government action. 

Logistics business Zoom2U founder Steve Orenstein said it was unfair that businesses are being left to bear the cost of taking responsible climate action, and agreed that more needs to be done to reduce Australia’s carbon footprint at a federal level.

Wage growth likely to fall behind

The Government has made it clear it is relying on strong business growth to fuel Australia’s economic recovery, but hasn’t done enough to actually support that ambition, said chief economist at the Committee for Economic Development of Australia Jarred Ball.

“The budget has only taken modest steps to permanently lift the capacity of households to navigate the growing pressures on the economy,” Ball said. 

“With growing inflationary pressures and interest rate rises on the horizon, cost of living pressures will not dissipate any time soon and these measures do not provide a long-term solution.”

Additionally, the budget papers predict interest rates will rise as soon as June.

Professionals Australia chief executive Jill McCabe said it is unlikely the Government’s expectations of wage growth will eventuate, as it has made similar predictions in the past that have led to nothing.

“This budget doesn’t address the significant decline in real wages nor the troubling growth of insecure employment over the past ten years,” McCabe said.

“It doesn’t demonstrate how predicted wage increases would flow through to workers who are reliant on awards, such as employee pharmacists or to workers who are engaged in precarious forms of employment and are on individual contracts such as IT workers.”

The Australian Council of Trade Unions was particularly critical, which claimed that instead of delivering wage growth, the Government had delivered “election bribes”.

That’s not to say that all players were disappointed in the budget. Premier Investments’ Solomon Lew commended Frydenberg, stating it is “sensible, balanced and stable”, and will deliver relief to millions of Australians. 

Australian Small Business and Family Enterprise Ombudsman Bruce Billson also welcomed the measures that aim to help small to medium businesses re-establish their operations in overseas markets. 

“We’ve heard first-hand from small and family businesses that have had their Covid recovery impaired by closed borders, restriction of movement and disruptions to international supply chains and these measures will be welcomed,” Billson said. 

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