New research released today in the September ARA Australian Retailers’ Index revealed retail support for the Federal Government has remained low during the past quarter, despite rising 10 points to a negative 22 per cent approval rating. Further, confidence among SME retailers was the lowest of any sector, falling 10 percentage points compared to a fall of eight per cent for the general SMEs nationally.

ARA Executive Director Richard Evans said retail SMEs were the only industry sector reporting net negative confidence levels.

“Retail SMEs recorded falling business confidence with a balance result of net negative two per cent, compared to a net confidence of 25 per cent for SMEs across all sectors. For the retail sector, this is 34 percentage points lower than the same time last year – reflecting the mood of the retail market at the moment.

“The most common concern for Australian retailers in the past quarter was a lack of work and sales, (22 per cent) and again this is higher than the general SME population (17 per cent). This was followed by retailers’ concern about the economic climate in general (17 per cent),” said Evans.

“Retailing is the barometer of the economy, and the fact that demand and consumer spending has dropped, sends a clear message the RBA was slamming economic brakes too hard with two interest rate rises earlier this year. The retail sector has born the brunt of the flow-on effects in the past quarter.”

The index also revealed about one third of retailers still feel the government is not on their side.

“The index shows small business legislators that reducing red tape is the number one priority for retailers, with those unsupportive of Federal Government policies blaming too much paper work and administration. On the other hand, those retailers who are supportive of Government policies (11 per cent) believe they have tried hard to reduce red tape.

Other key reasons retailers believed the Federal Government’s policies worked against them, said Evans, include increases in the petrol price impacting consumer spending and the government not offering incentives to small business.

“Although confidence in government policies has risen slightly, it seems retailers’ expectations are a little ahead of reality with sales performance falling 15 per cent in the past quarter and 52 per cent of retailers experiencing a decrease in sales, despite only 29 per cent of them saying they expected a decrease in sales in the previous quarter.

“We see the same trend with profitability. When retailers were asked about their expectations for the past quarter, 31 per cent of retailers indicated they expected to increase their profits. In fact, only 18 per cent increased profits while 53 per cent of retailers experienced a decrease in profitability. This is a drop of 20 percentage points from the previous quarter’s results,” said Evans.

Evans believes the government needs to be much more supportive of retailers.

“What the retail market needs is consumer confidence and this requires government narrative to become more supportive. Now is not the time for politics, rather we need positive government news. Retailers are warming to Prime Minister Rudd but it’s ‘tough love’.”