PBR - Can anyone see how the VAT rate cut can work?
I am struggling to see how the 2.5% VAT rate cut can stimulate the economy. If passed on across the board, it would mean a price cut of 2.1% in goods sold in the shops. I can't see how that will cause consumers to go out and buy things they weren't already going to. The stores are already running sales with 20%-25% savings in an attempt to kick start spending, 2.1% will be a drop in the ocean.
Part of the problem is that the government have created this expectation of a rate cut across the board.