Tuesday, January 11, 2011

Julia to Gerry - tell 'im his dreamin'

Prime Minister Julia Gillard has all but killed big retail's campaign to impose Goods and Services Tax on online purchases from overseas.

"I would be very reluctant to see Australians who are facing cost-of-living pressures not able to access shopping on the internet in the way that they access it now,’" Ms Gillard said.

"A small percentage, a very small percentage, of shopping is on the internet from overseas and the present advice is in terms of revenue and recovery from that small percentage that it would cost more in administrative costs than it would recover in revenue."

At present no GST is payable on overseas online purchases worth less than $1000. The Productivity Commission is inquiring into that limit...

The Prime Minister's intervention came as bank economists backed a campaign led by retailers including Gerry Harvey linking sluggish November sales to the increased popularity of internet shopping.

The figures show retail spending climbed just 1.3 per cent in the year to November, less than the rate of inflation and the rate of population growth.

"It's a far cry from the days of 6 per cent. In fact retail spending was much more buoyant during the financial crisis," said CommSec economist Savanth Sebastian.

Other economists said while online shopping was growing a GST would do little to slow it.

"To the extent Australian consumers are purchasing more from offshore, it is more likely to do with the 25 per cent pick-up in the exchange rate than whether they have 10 per cent GST," said TD Securities analyst Roland Randall.

HSBC economist Paul Bloxham said globalisation was hitting retailers in the same way as it had hit other industries.

"International competition has been brought to the feet of many Australian retailers, much as it has for many others. The strong dollar has also reduced the number of tourists and boosted the number of Australian's travelling offshore, both of which are not good for domestic retailers," he said.

To the extent that internet shopping was holding back retail spending, it might not be a bad thing.

"In terms of the macroeconomic view we need household spending to be subdued at the moment to make room for the large boost to the economy from business investment, particularly in the resources sector."

"We are getting to some degree what the Reserve Bank set out to achieve - slower growth in interest rate sensitive parts of the economy to make way for a mining investment boom that is getting started," Mr Bloxham said.

Other data released yesterday showed the job market losing steam with the Advantage index of employment advertisements down 2.3 per cent in December, the biggest fall in more than a year.

The Dunn & Bradstreet employment expectations index was up with businesses saying they were keener to take on workers in the March quarter of this year than at any time in the past seven years.

"Australia's economy is becoming increasingly resilient to consumer apathy as firms engaged in business-to-business trade and those exposed to the emerging economies of Asia keep the domestic economy powering ahead even while retailers struggle to convince consumers to spend," said Dun & Bradstreet consultant Dr Duncan Ironmonger.

Both sales expectations and price expectations fell.

Although a government-commissioned Access Economics report suggests between 20 per cent and 50 per cent of online purchases are made offshore, data from the research firm Experian Hitwise shows Australian internet sites such as JB Hi-Fi and Catch of the Day are still more than three times as popular as overseas sites.

But overseas sites are closing the gap, with the number of visits to portels such as Amazon.com and Victoria’s Secret climbing 32 per annum while Australian shopping sites grow by 25 per cent.


Annual retail spending growth

NSW 1.2%
Victoria 5.5%
Queensland 0.8%
South Australia 1.9%
Western Australia 2.2%

ABS 8501.0 Year to November, trend

Published in today's SMH and Age

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