Retailers are set for a sales rush in the wake of a generous tax break for small businesses that will encourage spending on everything from office supplies and computers to fencing and cars.
Diane Smith-Gander, a non-executive director at Wesfarmers which includes Coles supermarkets, Bunnings and Officeworks in its stable, said the measure would likely lead to a “bump” in sales for many retailers.
But to have longer-term economic benefits the money would need to be spent on productive assets that allowed businesses to grow and employ more people.
“You don’t want the small business equivalent of the flat screen TV phenomenon,” said Ms Smith-Gander, who is also chairman of Transfield and president of Chief Executive Women.
“I think this is a bit more generous than people were expecting.”
Ms Smith-Gander said that the budget’s other key focal points – on encouraging greater workforce participation – would only have longer term benefits for the economy if there were also more jobs created.
Segments within retail that could benefit from the measure included car retailers and office supplies, she said, and its impact was likely to appear in business confidence surveys.
Wesfarmers owns some of the country’s largest retailers including, Coles, Target, Kmart, Bunnings, and Officeworks.
While some businesses would be able to fund the purchases from their cash flow, there may also be an increase in demand for bank credit, she said.
“There will be some small business loans, and the banking industry will have to respond quickly.”
“It’s truly amazing,” said Robbie Sefton, who runs a communications consultancy and has just finished a three year term on the Reserve Bank of Australia’s small business advisory board.
“This will definitely create opportunities for people to upgrade that phone system, upgrade software or replace daggy office chairs, it will definitely make a difference.”
Ms Sefton said the measures would have a psychological impact.
“It is a really powerful message about saying ‘don’t give up’,” she said.
Ms Sefton said small businesses would look to grasp the detail of the opportunity which made the explanation of it important.
“If it is packaged up in a way that is simple and communicated well to their accountants they will, they rely on their accountant to give them advice particularly tax advice,” she said.
ANU institute of tax and transfer policy’s Miranda Stewart said the package was very similar to that rolled out as part of the Rudd government’s stimulus efforts in the global financial crisis although, crucially, this package was more generous with a $20,000 cap compared to a $5000 cap in Labor’s version.
She said there was empirical evidence that such programs would stimulate spending.
At the same time there was still an “open debate” about whether that spending was simply the bringing forward to investment that would have happened in future years and now would not, she said.
This article was originally published at the Sydney Morning Herald and was written by Mathew Dunckley and Clancy Yeates.