15 Sep 2010

Pre-GST retail splurge expected

6:59 am on 15 September 2010

Economists are confident retail spending will surge this month as shoppers take advantage of lower prices before a rise in GST on 1 October.

The economic recovery has been slow, with weaker than expected retail spending in July and slumping house sales in August.

ANZ economist Mark Smith says that while consumers remain cautious, spending on household appliances is picking up, which may signal the start of a GST spending spree.

Economists expect consumers to follow a pattern not seen since the last rise in GST in 1986, from 10% to 12.5%.

Retail sales increased 23% in the month preceeding the increase, mainly due to sales of furniture, appliances and other durable goods.

Westpac's markets economist, Michael Gordon, says a repeat splurge would give retailers a short-term reprieve.

Overall, however, he says households remain cautious and retail spending is growing no faster than income growth.

The Goods & Services Tax is to rise to 15% on 1 October. GST was introduced in 1986.