The combination of a high-taxing Government, falling consumer confidence, internet competition and lack of interest from wealthy shoppers has created what David Jones' chief executive, Paul Zahra called the retail perfect storm and resulted in a 20 percent loss for the high-end store.

David Jones stock plummeted 19 percent yesterday after the retail store said its profits would drop 9 to 12 percent this year and triggering a domino effect on the rest of the retail market.

Zahra said fears over the carbon tax and the flood levy contributed to the worst sales the company has experienced in the last twenty years.

"The carbon tax is impacting customer sentiment. It is very important. It targets our core customer," Mr. Zahra said.

"What you have seen in the last month is that the flood levy has become a reality, in people's pay packets, so the reality is she (Ms Gillard) has hit our customers directly."

David Jones closed yesterday at $3.20 while rival Myer dropped 6.42 percent at $2.48. Other retailers were not spared as Harvey Norman, JB Hi-Fi and the Westfield Group also suffered stock drops.

"This is an industry-wide issue. It's not specific to David Jones," Mr. Zahra said.

Harvey Norman boss echoed the sentiment when he said that the he had never experienced a situation in which government taxes threatened the retail sector.

"Figures released on Tuesday by the Westpac-Melbourne Institute signaled consumer sentiment had slumped to levels not seen since the global financial crisis."

"We're in the middle of a stink right now and, I'm telling you, it's only going to get worse," Mr. Harvey said.

And he may be right; consumers are now more worried about paying taxes, the loss of private health coverage and saving what money they have for mortgages and credit card debts. Zahra hopes that the consumer malaise is just a cyclical downturn and that shoppers will come back but with the economic climate this seems to be a forlorn hope.