Australian elections really are bad for retailers, some of the time

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Federal elections on average aren’t good for retailers but the impact is modest, according to analysis by Deutsche Bank.

The research found that retail sales growth in the 11 elections from 1984 was 30bps below average.

Total retail sales growth averaged 5.9% a year and growth was slightly lower at 5.6% in election years.

However, the negative impact wasn’t felt for all elections. Some polls have an apparent positive influence on sales.

Retail sales growth was negatively affected and fell below average in 57% of election affected months.

The Westpac MI Consumer Sentiment Index fell 55% of the time before, during or after an election.

“In other words elections are bad for retail and confidence just over half of the time but are actually good for retail just under half of the time,” says Deutsche Bank.

“The negative impact is most pronounced in the two months before the election writ is issued, but during the official election period (from writ issuance to polling day), retail sales were positively affected 54% of the time.”

The impact was greater on non food sales.

This election consumers are relatively healthy, given the recent interest rate cut and low inflation of non-discretionary household expenses such as petrol, rent and utilities, says Deutsche Bank.

“The mid-year timing should also be less negative because it won’t disrupt Xmas trade but the impact could be greater if the election doesn’t produce a clear result,” write Michael Simotas and Daniel Wanin a note to clients about the July 2 poll.

Deutsche Bank sees ASX-listed retailers Harvey Norman and JB Hi-Fi trading well due to strong housing, a favourable product cycle and the exit of Dick Smith from the market.

Some businesses have called out the problems with the election.

The most recent example of this is Myer in its third quarter sales update, saying the election was having an impact.

“Reasons for negativity cited by retailers include the potential for political candidates to portray a message of economic doom and gloom, general uncertainty amongst the voter base which delays decisions and the disruption and distraction associated with campaign
advertising which takes the focus away from retail,” the analysts write.

“Another example is travel retailers who cite sales weakness until an election date is confirmed due to travelers’ apprehension about being on holiday for an election.”

Qantas says bookings have been weak because of the election.

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