The Gillard government last week announced that it will be introducing a flood tax but a retail industry body said it will only mean retailers will suffer more.

The Australian Retailers Association (ARA) said retailers, including those businesses that have been affected by the floods, will be hit hard by the new levy as consumers tighten their purses.

Executive director Russell Zimmerman said the flood tax will result in less discretionary spend for consumers, which will be particularly damaging to the retail sector when the increased cost of living and the threat of further interest rate rises already have Australian families on a tight budget.

“While the cost of the flood tax will differ from family to family, the idea of a new tax is enough to significantly dampen consumer confidence to spend at a time when retail sales are at depleted levels,” he said.

“Retailers really need a break after a slow Christmas and over 18 months of poor trade, instead the flood tax is just another blow to the already struggling sector.”