21 February 2019
Eli Greenblat – Senior Business Reporter
Wesfarmers chief executive Rob Scott has cautioned both sides of politics against policies that crimp household disposable income, just as consumers face pressure from stagnant wages growth, rising costs of living and tighter access to credit.
Mr Scott said that while the ALP’s policy to remove excess franking credits on shares was “not the end of the world”, these tax refunds were relied upon by many Australians to fund their retirement.
The boss of a company which owns leading retail chains such as Bunnings, Kmart and Target said politicians must be mindful about cost pressures facing consumers in the lead up to the election, and not make things worse by further strangling incomes.
“We will start to hear in coming months about a range of policies from all political parties and I guess what I am saying is it is very easy to look at one policy in isolation, but I think it’s important we consider the impact of a number of different policies,’’ Mr Scott told The Australian, as Wesfarmers unveiled its latest profit result for the December half.
“So there is a whole lot of policies relating to tax, obviously franking credits, and I think we just need to be mindful at a time when consumers are under a bit of pressure, cost of living increases, real wages growth has been relatively modest, concerns around housing and access to credit, I think now is the time that when setting policies we should be mindful about the impact it can have on consumers and the impact it will have on business investment.’’
Proposed Labor tax policies include raising $60 billion over 10
years by eliminating excess franking credit refunds as well as scrapping
The Coalition argues Labor’s policies will damage the Australian economy and that
$200 billion in new taxes will dent consumer spending and constrict business investment.
“Those opposite have a plan for $200 billion of new taxes, including a big new housing tax,” Treasurer Josh Frydenberg told parliament last week, as the government warned of the impact new charges could have on personal incomes and the wider economy.
Labor’s franking credits policy has become a key election battleground, with the government arguing as many as 800,000 retirees could suffer financially if cash refunds for excess franking credits are axed.
Mr Scott said that while the market would adjust to the franking credits scheme, he agreed that Australians who rely on franking refunds for income – mostly retirees and pensioners – would see their disposable income fall.
“I think it’s important to note that before 2000 this (excess franking) refund wasn’t available so at end of the day the market will adjust and we will adjust, and franked dividends will continue to be of great value for a majority of shareholders.
“So I guess in terms of the policy, in isolation I don’t think it is the end of the world, but I think what needs to be considered is the policy in the light of a whole lot of other policies that could dampen consumer spending, because clearly there are number of people who rely on those credits, that is part of their income and influences spending.
“I wouldn’t get too hung up on that policy in isolation, but we need to consider the broader set of policies and what impact it might have on household spending going forward.’’
Mr Scott said election promises needed to be viewed through any potential threat to the household budget, with consumers already feeling the strains of rises in cost of living expenses.
“I think at a time when the consumer is particularly cautious and facing some challenges in terms of managing their budget, we need to be mindful the impact of any policy changes are going to make their lives even harder, and I think that is stating the obvious.’’