Media buyers worry budget will hit consumer sentiment and retail

Peter Horgan -

Peter Horgan, CEO of OMD

Some of Australia’s biggest media agency bosses have expressed concern about the extent of cuts in the federal budget, and in particular whether the reduction of government support to people on lower and middle income levels may hurt consumer sentiment and the broader retail sector.

Last night’s federal budget announced key changes to taxes and benefits which will cost many people hundreds or in some cases thousands of dollars, which together with the language around broader spending cuts had an impact on consumer sentiment said OMD CEO Peter Horgan. This followed a lengthy period where the government talked-down the economy in preparation for the budget.

“We have definitely noticed a market softening since the rhetoric campaign began,” said Horgan, whose agency has billings of $1.2bn. “The belief was that it was a softening up and the reality wouldn’t be as bad but I think this budget will see a sentiment downturn.”

John Preston CEO of independent media agency Match Media said he had similar concerns that a soft market combined with the budget might depress consumer spending even further.

“It is currently a concern that advertising spend in the market at the moment is already very short and potentially will be down year on year,” said Preston.

“Add this now to the negative sentiment around the budget, this will trigger reduced consumer confidence  and in turn clients may reduce advertising. Overall, the impact will be that consumer confidence will go down and advertiser spend will follow.”

Horgan said he was particularly worried about consumer spending in the low and middle income categories and how this might follow on to the retail sector.

“It is the mid to lower income levels that have been harder hit, with support withdrawn,” said Horgan. “The retail category has us a little anxious but the interesting thing will be the longer term effect whether people see this as financial responsibility and it inverts in the next two to three months, or whether people return to the financial bunker mentality which existed post the global financial crisis up until around this year.”

This perspective is shared by the retail industry’s representative body the Australian National Retailers Association (ANRA) who last night said they were worried about the flow on effects of recent media coverage in depressing a market which had been recovering.

“Retail is ultimately exposed to fluctuations in consumer sentiment as well as the general level of spending,” said Margy Osmond CEO of ANRA.

“Retail sales have been gradually growing for eleven consecutive months and retailers are concerned that today’s Budget will reverse these gains and erode consumer confidence at a critical time.”

Matt Perry chief strategy officer of Ikon Communications said the risk around the cuts was most likely to be psychological.

“If you are the higher end of the tax spectrum then the taxes and loss of benefit will have a lesser impact than if you are at the lower end. Therefore the impact on the everyday ‘battler’ Australians is going to be greater,” said Perry.

“If the look at the broader economy then the additional tax burden and loss of benefits is probably going to be focused more a psychological blow than a really significant economic blow.”

Other senior media buyers were more sceptical about whether the impacts would be long felt.

Chairman and CEO of GroupM John Steedman, which includes media agencies MediaCom, Mindshare MEC and Maxus which have a combined spend of more than $2bn, said the impact of the budget was likely only to be short term.

“It will have some impact in the short term but I don’t think in the longer term it will have an impact on consumer sentiment,” said Steedman.

“Those who have been more affected are the middle and upper socio economic groups, so yes while there is the petrol excise and that may have impact but I think it would be very short term.”

Adrian Roeling, general manager, Mitchells said: “Clearly the government had to strike a balance between improving the fiscal outlook without stifling the economy.

“Advertisers need to carefully consider the affect this budget will have on various tiers of income earners and the potential that this will further segment audiences.”

Nic Christensen 


Get the latest media and marketing industry news (and views) direct to your inbox.

Sign up to the free Mumbrella newsletter now.



Sign up to our free daily update to get the latest in media and marketing.