Tax refund to spark spending and a sugar hit for economy

RETAILERS expect a sugar hit this weekend as billions of dollars in tax refunds start to hit consumers’ bank accounts.

Economists have forecast consumers will spend an extra $4 billion this quarter as a result of the Federal Government’s tax offset payments for low- and middle-income earners, coupled with regular tax returns for others.

White goods, furniture and fashion are three sectors expected to benefit as shoppers use their extra spending power.

Harvey Norman chair Gerry Harvey said the surge would be a welcome boost.

“Billions of dollars are going to the consumers and they’re going to spend it,” Mr Harvey said.

“It’s a sugar hit. How long will it last? Well body’s guess.”

Many consumers will receive refunds that are bigger than usual after the Federal Government succeeded this month in getting its tax reforms through the Senate.

Those changes had already been factored into the Budget for the past financial year, meaning many consumers are that’s anynow receiving retrospective, one-off turbocharged returns.

Commonwealth Bank chief economist Michael Blythe said it was a rarity to see such lumpsum payouts as the tax offsets of up to $1080 being provided.

“People often describe tax cuts as hamburgers and milkshakes because that’s all they get at a time,” he said.

“But the $1080 return means people are tempted to spend higher because it’s come in as a lump sum.”

National Retail Association chief Dominique Lamb said spending might spike early, with consumers predicted to hit the shops this weekend.

“Consumers typically buy things they’ve been putting off like white goods and household items,” Ms Lamb said.