The National Retail Association is calling on the Federal Government to tackle ballooning wages bills, energy costs and insurance premiums in next month’s Budget.
“While everyone is rightly focused on the cost of living, high interest rates and low consumer confidence have pushed retailers into a cost-of-trading crisis, putting Australia’s second-largest employer at risk,” NRA director Rob Godwin said.
“The May Budget gives the Federal Government the opportunity to address skyrocketing energy and insurance premiums and take excess pressure off Australian businesses, the lifeblood of our economy.
“Unless these cost of trading issues that are driving higher prices are addressed urgently, the government can’t possibly hope to make any inroads on the cost of living.
The call-out comes as the national peak body released its 2024 Retail Sentiment Report, revealing that nearly 42 per cent of all respondents expect business performance to be worse in 2024 than last year.
Only 23 per cent expect sales to be better in 2024, while 44 per cent expect things to be worse, including 8 per cent who expect significantly worse trading conditions.
Meanwhile, 55 per cent expect a decline in year-on-year profits in the coming 12 months, and only 15 per cent expect profits to grow.
The cost of doing business underpins these results with 77 per cent projecting overheads to worsen.
Business owners have also cited wage costs, energy costs and insurance premiums as the three biggest constraints on their retail business’ success.
Godwin warned the Federal Government’s advocacy for a higher-than-normal increase in the minimum wage would increase the pain on small businesses, and would have to be passed on to consumers in the form of higher prices.
He expressed particular concern for regional and rural businesses that say they are struggling with inflated transport and logistics costs.
“Regional and rural areas have also been adversely affected by low e-commerce adoption rates, (5 per cent vs 18 per cent for metro) and limited staffing options,” Godwin said.
“We urge the Government to address high transportation costs and the increased complexity of the supply chain by providing funding mechanisms that support businesses in rural and regional areas.
The report also found that 29 per cent of retailers have cut advertising costs, and reduced spending on customer acquisition and retention, which will have a knock-on effect for manufacturers and suppliers in Australia. However, 90 per cent of retailers will continue or increase their expenditure on IT systems, given the reliance and need for e-commerce connectivity with customers.
“Whilst the Government can’t change interest rates, they can step up for businesses in next month’s Budget with policy measures to control energy and insurance costs for business and stimulate consumer confidence,” Godwin said.
“If retailers are worried about their futures, concerns are certain to flow through to hiring and investment decisions, and that’s bad news for the entire Australian economy.”