Wesfarmers & Woolworths: No problems with GST-free threshold after all

The supermarket giants are at odds with their retailing peers.

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While previous reports had suggested that Coles, owned by Wesfarmers (ASX: WES), and Woolworths (ASX: WOW) were backing a campaign by the Australian National Retailers Association (ANRA) to persuade the government to lower the GST-free threshold on imported goods from $1,000 to $20, according to a report in The Australian Financial Review, the supermarket giants have done an about face and now say bring on the competition!

The change in thinking has certainly left the supermarkets’ discretionary retailing peers, including Harvey Norman (ASX: HVN) and Super Retail Group (ASX: SUL), as well as the ANRA, on the back foot. It’s probably a clever publicity move by the supermarkets, as a much smaller percentage of their sales face direct foreign competition. In comparison, electronics retailers have borne the brunt of online overseas competition and their push to drive up prices for consumers won’t be winning them any friends amongst customers.

Foolish takeaway

Investors shouldn’t expect the dynamic to change all that significantly for retailers if they manage to successfully lobby a lower GST-free threshold. Retailers face much bigger structural issues and challenges and would most likely be better off spending their time focussed on these.

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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