Retailers making most of Rudd's $15 billion giveaway

Melbourne retailer Ruslan Kogan has billions of reasons to name a television sales deal after Australian Prime Minister Kevin Rudd.

Rudd is trying to boost economic growth with cash handouts totalling A$12.2 billion ($14.8 billion), or as much as A$950 to individuals. To attract some of that money, Kogan, 26, is advertising a 37-inch LCD TV he dubbed the Kevin37 for A$900.

"How people spend the bonus is up to them; I'd personally recommend paying off loans as a priority," Kogan said. "But in these economic conditions, people are spending more time at home."

The largest Government handouts among developed economies this year have inspired similar pitches by travel agents, restaurants and even brothels after the weakest annual retail-sales growth in eight years during 2008.

The risk for Rudd is that consumers - whose spending accounts for more than half the economy and helps sustain 1.5 million retail employees - will not pay out enough to prevent Australia from slipping into its first recession in two decades.

"If a substantial proportion is spent, it will help retail sales hold the line, rather than decline as they have elsewhere in the world," said David Rumbens, a director at Canberra research company Access Economics. "It will support jobs and businesses at a critical time."

With companies such as BHP Billiton, the world's biggest miner, firing workers at the fastest pace in two decades and unemployment at a four-year high of 5.2 per cent, some households are likely to hold on to some of the money.

Still, there is evidence Australians may not stash all the cash, which the Government began distributing last month. In December, retail sales rose 3.8 per cent, the biggest increase in eight years, driven by A$8.9 billion in Government handouts to pensioners.

A survey released on March 10 of 1000 people by Australia's national retailers' association found that more than half will save the money or use it to pay debt. Twenty-two per cent plan to buy clothes, furniture and appliances, while 22 per cent will use it for general living expenses.

To lure consumers, hotel owner Accor is offering "Ruddy Good Value" with three nights for couples at its Sydney Ibis hotel. Est., the Sydney Morning Herald's 2006 restaurant of the year, added a "credit-crunch" lunch for A$50, one-third less than the regular price.

Qantas, Australia's largest airline, and department-store operators David Jones and Myer Group also announced special promotions.

Pip Marquet, who manages the After Dark brothel in Sydney's beachside suburb of Brookvale, said business had increased since she advertised a "Let us stimulate you" deal in a local newspaper.

"I imagine people are using at least some of the package to stimulate themselves," Marquet said. "Perhaps they feel the need for some pampering."

Annual retail-sales growth slowed to 0.6 per cent last year as Australia's S&P/ASX 200 stock index plunged 41 per cent and house prices slid 3.3 per cent.

Waning global demand for minerals also stemmed a five-year boost to earnings that helped drive up Australian incomes by the most in 30 years.

To spur expansion and prevent a slump in the property market, Reserve Bank of Australia Governor Glenn Stevens has slashed the benchmark interest rate since September to a 49-year low of 3 per cent.

- BLOOMBERG