Rate cuts, handouts boost sales as shoppers get their mojo back

PEOPLE stormed back into shops in June as back-to-back interest rate cuts, mid-winter sales and $2.85 billion of government handouts pushed spending on shoes, clothes, cosmetics and takeaway food towards record highs.

Department store sales, languishing since the last round of government bonus payments during the global financial crisis, jumped 1.2 per cent in May and a further 3.4 per cent in June for the biggest two-month gain since $19 billion of stimulus payments were delivered between December 2008 and April 2009.

The $2.85 billion of handouts in May and June were intended to provide early compensation for the carbon tax and to support parents with school children. Retail figures released yesterday show instead they pushed up spending on takeaway food 1.4 then 1.9 per cent to a record high and spending on clothes, shoes and cosmetics and pharmaceuticals 1.7 per cent, 2 per cent and 2.5 per cent.

Over the year to June total sales were up 5.4 per cent, the best result since the global financial crisis and its associated stimulus payments.

''Across the board, Australians have clearly felt like they were a little more inclined to spend their pennies in June than they have for quite a while,'' said the Australian National Retailers Association chief, Margy Osmond.

"This is a great set of figures, but it's not the 'recovery' yet."

The government handouts were paid into bank accounts in May and June ahead of the new financial year to create a budget surplus in 2012-13.

But the Westpac economist Matthew Hassan said he expected the retail spending boom to continue beyond June because it was also fuelled by interest rate cuts worth about $1.2 billion and tax cuts that only took effect last month.

The CommSec economist Craig James said there was a chance the "perfect storm" of stimulus measures could change consumer psychology.

"Is it all a mirage? We'll find out in the next few months," he said. "It's reading like a well-scripted play. We've had sizeable rate cuts, federal government handouts, tax changes and lower petrol prices, as well as lower retail prices.

"Hopefully, consumers are now seeing the glass as half-full, not half-empty. The risk is that spending has merely been brought forward. But if deflation continues, Aussies will keep spending."

The Bureau of Statistics figures suggest that over the past year the high dollar and discounting have pushed retail prices down 0.2 per cent. The prices charged by food retailers are down 0.9 per cent, those charged in department stores are down 0.8 per cent and those charged for household goods are down 1.8 per cent.

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