The Australian Retailers Association (ARA) has welcomed the Reserve Bank of Australia’s decision to hold cash rates at 4.35 per cent.
ARA CEO Paul Zahra said that many retailers continue to face challenging economic conditions, including higher costs of doing business and slow consumer spending.
“This decision will come as cold comfort to many retailers who may have been fearing a cash-rate increase,” Zahra said.
“Cost-of-living pressures continue to impact the spending habits of Australians, with many households feeling the pinch.
“Whilst there is no immediate relief in sight, today’s announcement will help keep consumer and business confidence steady.”
Zahra added that small businesses are particularly vulnerable.
“We’ve seen extraordinary resilience from our retail community in recent years. But with ongoing pressure from many directions, many small businesses are struggling to cope,” he said.
“From the impacts of retail crime and ongoing labour shortages to rising costs across the board. Alongside this we have seen the most aggressive industrial relations reform in many decades, which also has flow on costs and impacts on business leaders and their teams.
“Retailers are also heading into peak-season trading, with many trying to regain a stable footing in the lead up to the holiday period.
“This pause on the cash-rate hike will hopefully allow retailers to build momentum into the all-important Christmas trading period where up to two-thirds of discretionary retail profit is made.”
According to a statement by the Reserve Bank, inflation has fallen substantially since the peak in 2022, as higher interest rates have been working to bring aggregate demand and supply closer towards balance.
“But inflation is still some way above the midpoint of the 2-3 per cent target range.
“In underlying terms, as represented by the trimmed mean, inflation was 3.9 per cent over the year to the June quarter, broadly as forecast in the May Statement on Monetary Policy (SMP).
“Headline inflation declined in July, as measured by the monthly CPI indicator. Headline inflation is expected to fall further temporarily, as a result of federal and state cost of living relief.
“However, our current forecasts do not see inflation returning sustainably to target until 2026. In year-ended terms, underlying inflation has been above the midpoint of the target for 11 consecutive quarters and has fallen very little over the past year.”
The RBA added that central forecasts published in August were for underlying inflation to return to the target range of 2–3 per cent late in 2025 and approach the midpoint in 2026.
"While headline inflation will decline for a time, underlying inflation is more indicative of inflation momentum, and it remains too high," the RBA continued. The most recent projections in the August SMP show that it will be some time yet before inflation is sustainably in the target range.
"Data since then have reinforced the need to remain vigilant to upside risks to inflation and the board is not ruling anything in or out. Policy will need to be sufficiently restrictive until the Board is confident that inflation is moving sustainably towards the target range."
Consensus across the business and economic landscape indicate that the RBA will likely not lower interest rates until 2025.
During a media call today, Premier Investments chairman Solomon Lew said the RBA won't do anything until they see an improvement in the economy.
"They can't be pressured," Lew said. "The government can say whatever they want - the Prime Minister, Jim Chalmers - they can say whatever they want. But the RBA has a responsibility, and they operate autonomously.
"And if the economy is not going well, people are not coping with the cost of living and all the other trials and tribulations then it's not going to happen for a while. It certainly won't be this year."
One day after the RBA decision, the Australian Bureau of Statistics shared that its monthly CPI indicator rose 2.7 per cent in the year to August 2024, down from a 3.5 per cent lift in June.
ABS head of prices statistics Michelle Marquardt said annual inflation in August was the lowest reading since August 2021.
At the group level, the top contributors to the annual movement were housing (up 2.6 per cent), food and non-alcoholic beverages (up 3.4 per cent), and alcohol and tobacco (up 6.6 per cent). Partly offsetting the annual increase was transport (down 1.1 per cent).
Inflation across fashion was more modest in August, at positive 1.7 per cent, down from a peak of 3.6 per cent in June and up from a low of 0.3 per cent in March.
Falls in both automotive fuel and electricity were significant moderators of annual inflation in August. Automotive fuel was 7.6 per cent lower than August 2023 after price falls in recent months.
For electricity, the combined impact of Commonwealth Energy Bill Relief Fund rebates and State Government rebates in Queensland, Western Australia and Tasmania, drove the largest annual fall in electricity prices on record of 17.9 per cent.
“The falls in electricity and fuel had a significant impact on the annual CPI measure this month,” Marquardt said.
“When prices for some items move by large amounts, measures of underlying inflation like the CPI excluding Automotive fuel, Fruit and vegetables and Holiday travel, and the Trimmed mean can provide additional insights into how inflation is trending.”
CPI inflation excluding volatile items and holiday travel was 3.0 per cent in August, down from 3.7 per cent in July.
Annual trimmed mean inflation, which excluded both the falls in automotive fuel and electricity, alongside other large price rises and falls, was 3.4 per cent in August, down from 3.8 per cent in July.
“Both measures of annual underlying inflation in August are the lowest they have been for 2.5 years,” Marquardt said.
Zahra said the ARA will continue to advocate for more relief measures from the Federal Government to ensure Australia’s $420 billion retail economy “not only survives but thrives”.
“It’s essential that retailers, both small and large, have the confidence to continue investing in their businesses over coming months,” Zahra said.