A major drag on Aussie retailers

Retail execs asking new government to eliminate the GST-free threshold on online purchases.

a woman

Blame the government. Premier Investments (ASX: PMV) Chairman and former Reserve Bank board member Solomon Lew told the Sydney Morning Herald that the Gillard-Rudd governments are at fault for Australia’s recent boom-bust cycle.

While mining successes over the past years have expanded Oz’s economy exponentially, the retail sector has been left in the dust. With national unemployment rates at a post-recession high of 5.8%, Lew is lamenting the former government’s “complete disregard” for average Aussie companies and jobs.

Current Premier CEO and former David Jones (ASX: DJS) CEO Mark McInnes couldn’t agree more: “80,000 Australians have lost their job in the last five years as a direct result of poor government policy.” Behind any runaway economy is an increasingly valuable currency. For local retailers like Premier, David Jones, and Myer Holdings (ASX: MYR), that meant (and means) consumers’ dollars are worth more abroad than they are in Oz.

That equates to the two scariest words Australian retailers have ever heard: online shopping.

Lew and McInnes are asking the new Abbott government to directly address this consumer shortcut by eliminating the $1,000 GST-free threshold on online purchases. While a $500 shopping spree on Amazon.com might not carry the same magnitude as corporate tax loopholes or secret Swiss bank accounts, Australia is the only developed country to keep international Internet purchases tax-free.

Foolish takeaway

There might be more wrong with retail than tax evasion, but Lew and McInnes have a point. Smart consumers are snagging similar items at cheaper overall costs, and there’s nothing retailers can do. It’s no game changer, but if Abbott is amenable to the revision, retailers will at least find themselves on more level footing from which to compete.

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Motley Fool contributor Justin Loiseau has no position in any stocks mentioned in this article. You can follow him on Twitter @TMFJLo.

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