What Aussie retailers should expect amid potential welfare changes

A central focus for the government ahead of the federal budget on 9 May is expected to be curbing inflation and easing cost of living pressures.

This, along with rising interest rates to combat inflation, is already placing immense pressure on the retail industry, with the sector bracing for a slowdown in consumer spending. Retail staff have been especially hard hit, with wages across the industry not keeping up with inflation.  

Ahead of the budget, two potential policy adjustments that have been widely discussed include increasing the JobSeeker rate and expanding the eligibility of financial support for single parents.

For the former, the Economic Inclusion Advisory Committee recommended that the government substantially increase Jobseeker payments, from $49.50 per day per person, to about $68 per day. This amid calls by the Australian Council of Social Service (ACOSS) that the current JobSeeker rate is “grossly inadequate,” and “entrench[ing] people in poverty.”

Meanwhile, it has been speculated that the Albanese government will increase the cut-off age of single parents who are able to access Parenting Payments – from when their youngest child turns eight, to when they turn 13 or 14 years old.

So, how would policy changes in these areas affect the retail industry – particularly amid this challenging economic climate.

Essentials vs luxuries

Partner and chief economist at KPMG, Dr Brendan Rynne told Inside Retail that these benefits are typically allocated to the poorest members of our society. Even on a good day, he explained that individuals who access JobSeeker or parental payments would likely struggle to make ends meet.

Rynne noted that an increase in these payments could help them to afford essentials – including rent, groceries and other utilities which are set to become more expensive in the near term – as well as “nice-to-haves” on occasion.

He also said that it would potentially improve retail turnover, but that it wouldn’t lead to a dramatic change in this area.

“I would hope that there’s enough of an adjustment to welfare payments so that these [consumers] are able to afford some of life’s luxuries [which] would go into the discretionary basket,” Rynne said.

“But the likelihood is that it’s going to be very limited. I don’t necessarily see an increase in welfare payments [being] hugely expansionary for the retail sector.”

He asserted that welfare payments would probably be targeted and “reasonably austere,” as the government looks to avoid setting a budget that is fiscally expansionary in a contractionary monetary policy setting. 

But, he said that there can be surprises on budget night.

“One thing that the government could [do] from a labour market perspective is to further enhance the retraining and re-skilling of existing workers who might not have the right skills necessary for our current or future economy,” Rynne said.

“The expectation is that household consumption – particularly discretionary spending – will come off over the remainder of 2023 and 2024. That will put increased pressure on the retail industry.

“There’ll be some alleviation with an increase in some welfare payments, but probably not enough to keep the sector as whole as it’s been for the last few years.”

“Double edged sword“

Greg Griffith, CEO of the National Retail Association, said that the organisation would welcome expanding the eligibility of parental payments.

He believes that expanding support for single parents would be good for the retail industry and the Australian economy, particularly during this cost of living crisis, with expanded income providing more opportunities for those eligible to spend money on weekly necessities.

This would also have the effect of boosting consumer spending, thus providing a positive impact for retailers – especially those specialising in food, grocery and household goods categories.

Regarding JobSeeker, he contended that a rate increase could be viewed as a “double edged sword.”

“A stimulus will bring an increase to spending on goods and services [and] significantly lessen the financial stress currently experienced by millions of Australians,” Griffith said. 

“[But] an increase to unemployment support could make it more difficult in our tight labour market to get staff into work when they would potentially earn the same money staying on JobSeeker.”

According to ACOSS and ABS data, 60 per cent of those obtaining JobSeeker payments, and 72 per cent of people accessing Parenting Payments are living in poverty. 

Griffith observed that Australia is dealing with a “particularly prickly” economic environment. As such, any measures that would provide relief to cost of living pressures would be warmly welcomed by retailers. 

With record low unemployment, he maintained welfare increases would benefit turnover rates in the short term, but make it harder to attract staff in the long run.

Griffith added that retailers are hoping to see a boost to productivity through skills and training development in the upcoming budget. This, as the sector has struggled to attract talent needed to drive innovation and growth.

“High inflation has remained for too long, which has eroded purchasing power and worsened the cost of living as well as the cost of doing business. We want the government to approach the budget with caution to avoid fuelling inflation [and] putting additional pressure on interest rates,” Griffith said.

“However, from what we have learned in recessions-past, economic recovery is intrinsic to retail recovery.”

Unfairly targeted

The Retail and Fast Food Workers Union [RAFFWU] told Inside Retail that they understand how deeply the cost of living crisis has affected low paid workers, and those looking for work.

The union advocates for large increases to JobSeeker payments, in line with the proposals made by the Government’s Economic Inclusion Advisory Committee, and much fairer Parenting Payment rates and conditions. 

President Jessica Barnes said that, until these areas are addressed, the lowest paid workers would continue to struggle.

“Retail and fast food workers are unfairly targeted by the below poverty level rates currently paid, as they include many single parents and those in precarious work situations,” Barnes said.

“Critically, we also need a rise in real wages. Inflation and the cost of living have outstripped wage growth for years [and] many workers are currently working multiple jobs to try and make ends meet.

“We should not accept in modern day Australia that people are working two and three jobs to put food on the table, and keep up exorbitant rent to property investors to keep a roof over their heads.”

Barnes said that housing affordability and accessibility is a critical issue for its members, with targeted policies over the years decimating the ability for low-paid members to secure housing.

“RAFFWU advocates for a million new public housing dwellings to be funded, and for rent freezes to be put into place. We understand that shelter is a human right, not an investment vehicle for the already wealthy,” she said.

The post What Aussie retailers should expect amid potential welfare changes appeared first on Inside Retail.