Rate cut, budget boost and Dick Smith shutdown to power retail sales

Australian retailers are bracing for a record run into June 30 as federal budget tax breaks and the Dick Smith shut down power a billion-dollar, small business spending spree.

JB Hi-Fi shares have surged almost 6 per cent since Monday as investors bet the combination of an interest rate cut, federal budget spending incentives and the closure of Dick Smith will push sales to record levels in May and June.

Broker Citigroup has forecast the cut to official interest rates along with the federal government's small business budget initiatives will boost retail sales growth as much as 1 per cent and "given recent signs of  spending slowdown, these initiatives should help companies like Harvey Norman and JB Hi-Fi leap over high hurdles for the June 2016 quarter", the broker said.

JB Hi-Fi chief executive Richard Murray is looking forward to bumper sales in May and June. Photo: Pat Scala

Citigroup head of research Craig Woolford said the budget measures, including the extension of the $20,000 instant deduction for small businesses with a turnover of up to $10 million, should equate to a $1.1 billion boost for Australian households in fiscal 2017.

"This may provide up to 1 per cent comparable sales growth for retailers like JB Hi-Fi  and Harvey Norman," Mr Woolford said.

JB Hi-Fi chief Richard Murray said up to $1 billion in sales was also up for grabs as the shutters finally came down on the last Dick Smith stores on Tuesday.

Gerry Harvey is already reaping sales from the failure of Dick Smith Photo: Rohan Thomson

"Our job is to capture as much of those sales as we can," Mr Murray said.

"We want people investing in technology to make their businesses more efficient and if that's what the government is doing in terms of developing a knowledge-based economy, that's a great outcome."

Mr Murray would not say how much the $20,000 instant tax deduction boosted sales last year, except to say it was "significant", and that the chain had a strong promotional plan for May and June.

Officeworks is likely to be another big winner from the small business tax breaks. Photo: Supplied

"[We] are well placed to cycle the strong comps in the prior year driven by the small business tax incentives," Mr Murray said.

The sales were concentrated in the technology segment, including mobile phones, computers, laptops and tablets; however, veteran retailer Gerry Harvey said furniture and whitegoods sales were also boosted.

Mr Harvey said the budget measures showed the government understood the importance of small business to the economy.

In addition to the expected end-of-financial-year spending spree, he said the business was already reaping sales from the failure of Dick Smith.

"When you get a collapse like Dick Smith, people look a bit more closely at brands and tend to go back to trusted brands ... I think we benefit from that," Mr Harvey said.

Harvey Norman will pick up as much as $200 million in sales from the closure of Dick Smith, according to Mr Harvey putting it on track for its best performance in about seven years.

Wesfarmers' Officeworks is likely to be another big winner from the small business tax breaks but car sales are also expected to accelerate

Federal Chamber of Automotive Industries chief Tony Weber said the changes to the small business threshold could "encourage business purchases of new motor vehicles".

Data released by the chamber on Wednesday reveals a 7.2 per cent increase in car sales from April last year, coming off what Mr Weber described as a "remarkable year of sales".

Figures have shown an increase of 14.1 per cent in the light commercial market, with vehicles such as the Toyota Hilux and Ford Ranger having increases of 21.3 per cent and 35.1 per cent in sales respectively.