Budget Handouts to Urge Aussies to Troop to Woolworths, David Jones

Retailers are hoping that Australians would spend some of their budget handouts on shopping to lift the industry.

While Australian Retail Association President Roger Gillespie said that it would be a welcome scenario to see money circulating locally through the retail sector, it would unlikely happen.

"I think in all reality it won't happen. People aren't confident to spend their money. There is still a lot of fear in the community, especially given the full impact of carbon tax is still uncertain," The Australian quoted Mr Gillespie.

About 1.5 million Australian households are expected to receive the $600 a year as family tax benefit in the federal budget announced by Treasurer Wayne Swan. Besides the cash payments, each high school student would receive up to $820 and each primary-school child $410. There is an extra $350 per couple and $210 for singles beginning 2013 for welfare recipients.

While the bulk of the extra cash is expected to be used to help households cope with rising cost of living, the Gillard government did not provide guidance on how the recipients should spend the money.

"It's not up to me to determine or advise people what they should do with their income.... I think Australians generally spend their money responsibly and I'm sure they will on this occasion," ABC Radio quoted the treasurer.

CHOICE, a consumers advocate group, said that based on their feedback, recipients of the cash would use the money to pay their bills, primarily for immediate expenses, electricity bills, car registration and groceries. Some said they would partly save the extra money, said CHOICE spokeswoman Ingrid Just.

While retailers are not sure if they would benefit from the cash payment in the form of consumer spending, Mr Gillespie said the industry was disappointed that the government did not fulfill its promise to cut business tax by 1 per cent to 29 per cent from the current 30 per cent. The cut was supposed to be offset by the new mining tax which the government will collect beginning July 1. However, the government opted to make upfront payments to low-income families instead of cutting the business tax rate.

"The government has given with one hand through initiatives for business and consumers but taken with the other with no compensation for the carbon tax or superannuation increase," The Herald Sun quoted the retail executive.

In the past 12 months, retail spending grew only less than 0.2 per cent a month, although March sales unexpectedly increased 0.9 per cent to boost the yearly increase to 3.7 per cent.

In the three months to the March quarter, food sales went up 2.5 per cent, clothing and shoe sales grew 3.2 per cent and sales of takeaway food and restaurant increased 3.9 per cent. However, the jump was also caused by lower prices after food prices slid 1.8 per cent, clothing and shoes 1.4 per cent and takeaway and restaurant food 0.5 per cent.

"It seems like lower prices had a lot to do with it.... There has never been a bigger fall in retail prices in 30 years. A stronger Australian dollar, cheaper food, ongoing innovation in technology goods, strong global competition and good old-fashion discounting have prompted Aussies to part with their cash again," The Sydney Morning Herald quoted CommSec chief economist Craig James.

Australian National Retailers Association Margy Osmond said an improvement in retailing depends a lot on the budget and how Australians would respond to it.

"We used to know how people would respond to cash but there are no longer as predictable. It could be that unlike earlier stimulus packages many people who receive the money from the government will save it, they will put it away and not spend it," she told The Sydney Morning Herald.

Ms Osmond added that Australians are savings at levels not seen for the past two decades.

David Jones Chief Executive Paul Zahra decided not to bank on the cash payout to lift sales but instead appointed new executives to boost sales of the department store. He appointed seven new people to key positions to reverse the 6.7 per cent sales decline to just $1.01 billion suffered by David Jones in the six months to Jan 28.

The seven include former Woolworths General Manager Donna Player who was named group executive for merchandise, Marion Joyce as general manager of marketing, promotions and publicity, Adriane McDermott as general manager for marketing, digital and advertising, and Kate Whitney as general manager for financial services marketing.