The National Retailers Association is wiping its brow ahead of Christmas after the Reserve Bank of Australia held the cash rate at 4.35 per cent, while the Australian Retailers Association (ARA) is calling it a missed opportunity.
NRA interim CEO Lindsay Carroll said retailers are relieved that hard and fast rate hikes have become a thing of the past but urged the Reserve Bank to consider a rate cut in the new year.
“Consumer spending is slowly starting to recover, and Australian retailers can peacefully reap the rewards of the silly season to carry them into the new year,” Carroll said.
“However, with business investment and productivity at an all-time low, it is imperative that the Reserve Bank starts the new year off with a rate cut at a time when spending is low.”
Carroll said end-of-year sales make up over a third of a retailer’s profits for the year, which can help the majority of the sector carry themselves through to the quieter months of next year.
“The weight of these interest rates is unprecedented, especially since they’ve done little to address true inflationary drivers like housing supply and low productivity,” Carroll added.
“We call on policymakers to consider the enormous contribution of the retail sector to the health of the Australian economy before they make their decisions.”
Meanwhile, the ARA was hoping for a cash rate cut in December to provide much-needed relief for households and businesses facing financial pressures across the festive season.
ARA chief industry affairs officer Fleur Brown said retailers continue to face the dual challenges of subdued consumer spending and rising business costs.
“Small businesses are particularly vulnerable, grappling with rising costs in all areas, and continuing to feel the squeeze from economic pressures,” Brown said.
“With the peak trading period now underway, where many discretionary retailers make up to two-thirds of their annual profit, a rate cut would have provided retailers with renewed confidence across Christmas and the New Year.”
Brown said retailers have been investing significantly in the Christmas season, from hiring additional staff to introducing new products and updating store displays.
“Retailers employ one in ten Australians and as a sector, contribute 18 per cent of our national Gross Domestic Product (GDP). The holiday season is crucial to ensure retailers can weather the slower months ahead,” she said.
“Retailers also employ tens of thousands of casual workers over this time, providing an important source of additional income for many Australians.”
Brown added that the ARA will continue to advocate for relief measures from the Federal Government to support the sector.
“We urgently need action to ensure Australia’s $430 billion retail economy not only survives but thrives,” she said.
“It’s vital that retailers—both small and large—are given the confidence to continue investing in their businesses through the critical months ahead.”
According to the Reserve Bank, sustainably returning inflation to its target range of 2-3 per cent within a reasonable timeframe is the board’s highest priority.
The bank added that longer-term inflation expectations to date have been consistent with the inflation target and “it is important that this remains the case.”
“While headline inflation has declined substantially and will remain lower for a time, underlying inflation is more indicative of inflation momentum, and it remains too high. The November SMP forecasts suggest that it will be some time yet before inflation is sustainably in the target range and approaching the midpoint.
“Recent data on inflation and economic conditions are still consistent with these forecasts, and the board is gaining some confidence that inflation is moving sustainably towards target.”
The RBA board will continue to rely upon the data and the evolving assessment of risks to guide future decisions.
“In doing so, it will pay close attention to developments in the global economy and financial markets, trends in domestic demand, and the outlook for inflation and the labour market. The board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that outcome.”