Retailers banking on Abbott

Consumer confidence and spending expected to increase

a woman

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Australia’s retailers are cheering the Coalition federal election win, saying a clear majority will reduce uncertainty and boost consumer sentiment.

Woolworths (ASX:WOW) chief Grant O’Brien has told The Australian that weak consumer confidence was the key issue for his company. “We have a robust business that has continued to invest and create jobs over the last few years, but our plans to deliver future sustainable growth are underpinned by a return to certainty,” he said. Mr O’Brien has also praised the new government’s commitment to reduce red tape for business, which would allow Woolworths to increase productivity and keep grocery prices low.

Bernie Brookes, chief of department store Myer Holdings (ASX:MYR) also told the newspaper that the clear outcome would help boost overall business conditions. He said that the company wanted to see certainty flow back into consumer confidence to drive investment and job creation. Confident consumers are more likely to increase their spending and support renewed demand said Mr Brookes.

Over at Wesfarmers (ASX:WES), which owns Coles, Target, Kmart , Officeworks and Bunnings, as well as insurance, energy and resources businesses, managing director Richard Goyder says the Liberal / National Coalition mandate is encouraging. Mr Goyder said he wants to see the government recognise that business, both small and large, is the primary creator of wealth and jobs in Australia. “We need an environment that encourages us to invest,” he said.

David Jones (ASX:DJS) boss Paul Zahra reckons it’s too early to call how consumer sentiment will respond, given the Coalition has yet to annunciate its policies. But Mr Zahra will clearing be hoping that the uncertainty and weak consumer confidence will disappear. Just last week, the Australian Bureau of Statistics reported that department store sales had dropped 7.9% in July, compared to the previous month.

Foolish takeaway

Commsec chief economist Craig James suggested that now the election is over, consumers can “get on with life”, and the Reserve Bank was waiting for the election to be over so it can more accurately gauge what shape the economy is in. The next few months should give us an indication of how uncertainty before the election has weighed on consumers.

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Motley Fool writer/analyst Mike King owns shares in Woolworths.

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