Consumers won’t spend Rudd’s ‘retail rescue’ dollars

By Martin Vedris

SYDNEY: A survey by the Australian National Retailers Association (ANRA) has found that 40 per cent of consumers would not spend their share of the $3.9 billion handout, which is part of part of the Rudd Government’s $10.4 billion Economic Security Strategy.

According to a statement from Kevin Rudd’s media department, the financial support will be delivered to eligible consumers in the fortnight beginning 8 December 2008.

The government’s hope was that the timing of this payment just before Christmas, and the fact that demographic targeted for the aid generally needs to spend most of their income on living costs, would equate to more money going back into the economy, via retailers’ tills.

The ANRA research suggests the funds may instead go into savings and paying off debts, thus draining money from the economy.

“Close to 40 per cent of people will put the money towards their mortgage or credit card debt, or pop it into the bank,” ANRA CEO Margy Osmond said today. Osmond was quoting findings from an ANRA poll, taken late last week, of 1,000 Australians, who were asked how they will spend their part of the Federal Government’s stimulus package.

“People are going to use this money to get ahead and relieve the financial pressure,” Osmond continued.

“Only nine per cent are going to spent it on themselves or Christmas gifts or entertaining over the festive season.

“Most people over the age of 65 will put the extra money towards living expenses or save it.

“This survey confirms what we have been saying for a number of months now. People are being sensible with their money — they’re cocooning. They’re spending their money carefully and only purchasing what is absolutely necessary.”

Osmond is now calling for a further interest rate cut to stimulate the Australian economy.

“There are now clear signals that another interest rate cut is warranted,” Osmond said.

“Retailers are being squeezed on two sides. Consumers are hesitant to spend which is hitting the bottom line, and at the same time retailers are paying more for their product because of the reduced buying power of the Australian dollar.”

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