The Reserve Bank of Australia has decided to hold the cash rate at 4.10 per cent, and retailers are not happy.
A joint statement from the National Retail Association and the Australian Retailers Association called it a significant blow for consumer and business confidence that will delay the recovery of the retail sector.
It comes as year-on-year retail sales growth remains modest in February 2025 according to new data from the Australian Bureau of Statistics (ABS), while the fashion sector witnessed a relative plateau in sales.
“The RBA’s move to keep the cash rate on hold is a distressing decision for retail businesses around Australia – particularly given we are well within the target inflationary range outlined by the RBA,” ARA chief industry affairs officer Fleur Brown said.
“This certainly prolongs the pain many households and retail businesses are under and may unfortunately be a death sentence for some businesses.”
Brown added that with consumer spending “in the doldrums”, business costs surging and little budget relief from the Federal Government, Australia remains far from a retail recovery.
“The climate of geopolitical tension around trade and tariffs also adds uncertainty for retailers,” Brown said.
“That’s why we must see more sustained efforts to drive momentum for this sector which employs one in ten Australians and contributes $430 billion to our economy. We can’t have an economic recovery without a retail recovery. “
NRA interim CEO Lindsay Carroll said retailers are already beginning to see the fruits of the rate cut last month, with the sector hoping for more cuts this year.
“Consumer sentiment is on the uptick, and we’re starting to see consumers trickling into shopping centres, and not just for groceries. Wages are up and inflation is down, so Aussies feel safer about spending,” Carroll said.
“However, many retailers are still struggling to keep their heads above water. Business insolvencies have risen sharply in the last couple of years, and the Federal Budget was another opportunity for the government to show the ailing sector a little bit of support.
“We urge policymakers to focus on measures that boost investment and productivity, so, as Australia’s second-largest employer, retailers can continue to provide opportunity, job security, and sustainable growth for the economy, and maintain the momentum needed to drive recovery.”
In a statement, the RBA monetary policy board shared that inflation has fallen substantially since the peak in 2022, but revealed that they are cautious about the outlook.
“Private domestic demand appears to be recovering, real household incomes have picked up and there has been an easing in some measures of financial stress. However, businesses in some sectors continue to report that weakness in demand makes it difficult to pass on cost increases to final prices,” the RBA noted.
“At the same time, a range of indicators suggest that labour market conditions remain tight. Despite a decline in employment in February, measures of labour underutilisation are at relatively low rates and business surveys and liaison suggest that availability of labour is still a constraint for a range of employers.
“Wage pressures have eased a little more than expected but productivity growth has not picked up and growth in unit labour costs remains high.”
The RBA added that there are notable uncertainties about the outlook for domestic economic activity and inflation.
The central projection is for growth in household consumption to continue to increase as income growth rises, the board claimed.
“But there is a risk that any pick-up in consumption is slower than expected, resulting in continued subdued output growth and a sharper deterioration in the labour market than currently expected. Alternatively, labour market outcomes may prove stronger than expected, given the signal from a range of leading indicators.
“More broadly, there are uncertainties regarding the lags in the effect of monetary policy and how firms’ pricing decisions and wages will respond to the demand environment and weak productivity outcomes while conditions in the labour market remain tight.
“Uncertainty about the outlook abroad also remains significant. On the macroeconomic policy front, recent announcements from the United States on tariffs are having an impact on confidence globally and this would likely be amplified if the scope of tariffs widens, or other countries take retaliatory measures.
“Geopolitical uncertainties are also pronounced. These developments are expected to have an adverse effect on global activity, particularly if households and firms delay expenditures pending greater clarity on the outlook. Inflation, however, could move in either direction.
“Many central banks have eased monetary policy since the start of the year, but they have become increasingly attentive to the evolving risks from recent global policy developments.”