The tax cuts that came into effect in July, were said to be expected to boost household incomes and add to spending in the second half of the year yeilding A$40 a month to a person on average weekly earnings of A$56,000. However this amount almost exactly matches the May interest-rate increase on an average mortgage of $250,000.

With better retailing results now announced during the same period, its clear that the consumers who dont have high mortgages were able to increase spending.

This increased consumer spending coupled with the current higher inflation figure brings about the prospect of even more interest rate hikes. The disturbing factor is that the higher inflation figure is mostly effected by higher oil prices and cyclone related bannana prices, (two external factors that wont be influenced by our reserve bank’s monetary policy weapon).

The Australian Bureau of statistics last week released data that shows Australia’s retail sales rose 0.6% in July from the previous month, beating expectations of a 0.5% rise and following June’s hefty 0.9% increase. Employers hired 50,000 extra workers in July and $36.7 billion of tax cuts took effect. The Australian economy, now in its 15th year of expansion, grew 3.1% on the previous year.

The inflation rate was 4% in the second quarter, the first time in more than three years it has exceeded the Reserve Bank’s target band of 2-3%.

Recently announced retailing results include:-

• Woolworths Ltd. Sales up 20% in the year to June 30.
• The Reject Shop Sales up 17% in the year to June 30.
• JB Hi-Fi Ltd. Second half profit up 42% on sales of flat-screen TVs and computer games.

Gift & Homewares retailers tend to pass on petrol rises immediately as they price goods based on the current landed price. However the price of many other consumer goods may also rise again as the freight industry passes on fuel costs, which make up more than a third of their operating expenses.

A more serious concern to retailers and c is the quality of service provided by Australian freight companies.

Australian Trucking Association chief executive Stuart St Clair has recently said that whilst most large trucking operators have charged a fuel levy for some time, many smaller operators have not. He has warned them to ensure their prices reflect higher fuel costs — or risk going under.

Whilst freight companies cut costs customers see that they all seem to be cutting corners and squeezing employees and service levels. The outcome is late deliveries through cutting back delivery runs, and more miss-directed freight. Even worse is the rising level of damaged stock through careless handling from employees that are not happy with their jobs. This causes significant losses and costs which eventually get passed on to consumers.

The time retailer and wholesaler staff spend chasing missing freight is considered another unreasonable cost foisted upon them by a poorly administered Australian freight industry. Major Australian freight companies seem to care little for their reputation as reliable contractors.