Retailers, fast food to benefit from federal stimulus package

JARED LYNCH

The Australian

ELI GREENBLAT

MARCH 12, 2020

Select retailers, fast food outlets and gaming companies will be the big winners of Scott Morrison’s $4.8bn cash splash to stave off a coronavirus-fuelled recession, with pensioners and Newstart recipients set to buy up on small-ticket items from new shoes to fish and chips.

Under the $4.8bn plan, pensioners and other income support recipients will receive a tax-free $750 one-off payment from March 31. The move comes as the World Health Organisation declared the outbreak of the coronavirus a global pandemic.

The payments are less than the Rudd government’s $900 handouts to most Australians to combat the fallout from global financial ­financial crisis 11 years ago.

But retailers, pensioner groups and economists say the Prime Minister’s plan is sensible and the fastest way to inject money into the economy, with the cash set to be spent immediately by those who most need it.

The Business Council of Australia said the package would help keep people employed, while BHP chief executive Mike Henry said the government had taken a “calm and methodical approach” in an “extremely challenging time”.

“Clearly, the coming weeks and months will challenge the Australian economy and the resolve of all Australians,” Mr Henry said.

“Moves to stimulate the economy, support small business and provide an additional safety net for the vulnerable in our community is the right thing to do.”

National Seniors Association chief advocate Ian Henscke said about 180,000 people aged between 55 and the pension age were on the Newstart Allowance, which paid $15,000 a year, and they would welcome the cash payments. He said the money would be spent on basic items such as food, clothing, dentist appointments, and car repairs and tyres.

“If you put it in realistic terms, [the $750 payments] is a bit more than $2 a day, so it’s not a huge amount,” Mr Henscke told The Australian, adding an overhaul of the retirement income system was needed.

“But obviously those who will get it will be grateful because if they were waiting to go to the dentist or buy a pair of shoes they now can.

“We hear stories from people that their only what you’d call a takeaway meal is when they get the pension once a fortnight. One man I know says he looks forward to getting his pension cheque because that’s when he buys fish and chips — that’s his one treat.”

The payments are part of a broader $17.6bn stimulus package, which Treasury hopes will avoid negative quarters of growth in June and avoid a recession.

It is expected to deliver a shot in the arm to selected areas of the retail sector, which has battled a weak first quarter as the outbreak of COVID-19 hit supply chains and consumer sentiment.

Wesfarmers, which owns Target and Kmart, is likely to see a spike around children’s and budget clothes, particularly with those on the Family Tax benefit set to ­receive the $750 windfall. Other retailers including Woolworths-backed Big W could experience a spending lift.

Outgoing Australian Retailers Association executive director Russell Zimmerman said his biggest concern in the wake of the coronavirus pandemic was ensuring people remained employed.

Mr Zimmerman said the package would provide much-needed support to the retail sector and, while mindful of criticising the Rudd government’s $900 handouts to most Australians, would start flowing through the economy immediately.

“It’s very targeted to the requirements of people who need it now rather than just being handed to everyone no matter who they are,” Mr Zimmerman said.

“These are people who have not had the money to buy extras in life, so any support that the government can give them is great. That money will flow on into the retail industry and we will see a far stronger retail economy moving forward.”

National Australia Bank chief economist Alan Oster said targeting direct cash injections into the bank accounts of pensioners and welfare recipients was the fastest route to get that money into the economy.

“They will spend it,” Mr Oster said. “It doesn’t go into the accounts until around March 31 so it will get spent in the June quarter and the poorer they are the more likely it is to be spent.

“If you have discretionary income you would be unlikely to spend that money, which is what I think the government is trying to do.’’

Mr Oster said some segments of the retail sector would soak up the cash, but not all.

“Retail will be helped to get over a difficult period by this, but it depends on what retailer you are,” he said. “If you are in hospitality, things like that, I think it will be a problem. Department stores and, I suspect, supermarkets are doing better … I think basically the cash to households is deliberately being targeted to boost retail spending in the second quarter.’’

While consumers have been avoiding large malls where clusters of the coronavirus have broken out, retailers in suburban shopping centres that focus on family staples such as budget clothing items, electronics and seasonal winter goods are expected to be the main beneficiaries of the stimulus package.

This could see companies with a wide spread of malls across the nation benefit, particularly those in regional cities and states with a higher proportion of people on family and government benefits.

Most major shopping centre groups including Scentre, owner of the local Westfield empire, Vicinity Centres, Stockland, GPT and funds run by Lendlease and AMP have a wide spread of malls in Sydney and Melbourne’s growing western corridors and in large cities. Scentre, for example, has malls in Sydney’s Penrith and Mount Druitt that may benefit and GPT has centres including Darwin’s Casuarina Square and Wollongong Central.

But immediate winners are likely to remain the convenience-­focused SCA Property Group and Charter Hall Retail REIT, which house Coles and Woolworths ­supermarkets that have traded strongly. Private players, like Sentinel Property Group, which owns neighbourhood shopping centres across regional Australia, could also benefit from the $750 cash payments. Other beneficiaries could be Coles’s Liquorland and Woolies’ BWS stores as people switch habits, buying more to consume at home as they avoid social gatherings at pubs while fears of an outbreak run high.

Elsewhere, pubs, pokies and gaming operator Tabcorp is expected to receive some of the funds. Woolworths’ gaming arm ALH Group (which it plans to demerge) is also in line for a boost.

Business Council of Australia chief executive Jennifer Westacott said the government’s package was “well thought through” and called on big businesses to bring forward investments to further generate economic growth.

Ms Westacott particularly praised elements of the broader plan, including $25,000 payments to businesses with annual turnover of $50m, $7000 payments to small businesses to support apprenticeships and raising the instant asset write-off threshold from $30,000 to $150,000.

Here Wesfarmers-owned Officeworks and Bunnings warehouse are likely to win from the increase. Harvey Norman would also benefit through furniture and office equipment sales.

“The longer the coronavirus goes on, the more vulnerable Australia’s biggest companies will become,” Ms Westacott said. “So, the

budget is the next opportunity to shore up our competitiveness and permanently change the trajectory of the economy.

Additional reporting: Ben Wilmot