Australia’s retail sector is taking a hit from two sides as reduced JobKeeper payments increase employee costs and reduce the spending power of customers.

The industry has remained strong throughout the coronavirus pandemic, but new figures show consumer spending has been underpinned by federal government support.

As payments reduce, economists warn the retail sector, which employs almost 10 per cent of the workforce, will likely see an increase in job losses as consumers shut their wallets.

New data from AlphaBeta and illion shows government payments like JobKeeper have been an incredibly effective form of stimulus.

Although spending suffered a sizeable hit during the early stages of the pandemic (down 21 per cent on normal levels at its trough), this quickly recovered following the introduction of record-breaking fiscal support in May, the research found.

Between April and July, spending by Australians receiving support payments was high enough to offset the weakness from other sectors of the economy.

And over the past two months, spending from those not receiving support has begun to return to normal.

“Without this stimulus, the economy would have fallen much further,” AlphaBeta managing director Andrew Charlton said.

“This is a textbook use of stimulus and it worked.”

Source: illion, AlphaBeta

But cuts to the JobKeeper rate could dent that performance, according to Australian Retailers Association CEO Paul Zahra.

“JobKeeper has helped many retailers keep their doors open or stay afloat during lockdown by maintaining staff,” Mr Zahra told The New Daily.

“JobKeeper has been an added benefit for consumers, too. Maintaining some spending power for households which otherwise may have been affected by a job loss has been good for the retail sector.

“The changes to JobKeeper and JobSeeker mean that the contribution of these payments to overall retail spend will be lower.”

Bad news for employment

Although eligible businesses will still receive wage subsidies from the government, independent economist Saul Eslake said the payments may not be enough to justify keeping staff.

This is especially true for part-time staff, whose JobKeeper payments have been halved to $750 a fortnight.

Meanwhile, some employers will now be ineligible for JobKeeper, as they will need to prove their turnover has fallen by almost one-third to receive the payments.

“Bear in mind retail sales as a whole were higher in June than they were in March in aggregate,” he said.

Preliminary retail trade data from August suggests consumer spending has since fallen, but Mr Eslake said there will still be “a fair few” retailers that will no longer qualify for the payments.

“Now if their turnover has improved since they were on JobKeeper, maybe they can afford to keep their staff on, but they may choose not to,” he said.

New JobKeeper rules

JobKeeper payments were reduced by at least $300 a fortnight on Monday as the federal government introduced new rules designed to wean the economy off fiscal support.

Previously, every worker eligible for the payment received a flat rate of $1500 a fortnight.

Under ‘JobKeeper 2.0’, this rate falls to $1200 a fortnight for Australians working the equivalent of 20 hours a week or more during reference periods in either February or June.

And the cuts are bigger for part-time workers.

Employees working less than 20 hours a week during the reference periods have had their payments reduced to $750 a fortnight, and eligibility depends on their employer.

To access the payments for employees, businesses will need to demonstrate their turnover in the three months to September 30 was 30 per cent lower than during the same period in 2019.

For businesses with an annual turnover above $1 billion, that threshold increases to 50 per cent.