Australian retailers have called the 25 basis point cut in the national cash rate a welcome confidence boost, but warned that tough times are far from over for the sector.
The Reserve Bank of Australia (RBA) trimmed the cash rate to 4.10 per cent, down from 4.35 per cent. It is the first time interest rates have come down since they first rose in May 2022. The rate was held at 4.35 per cent since November 2023.
The Australian Retailers Association (ARA) and National Retail Association (NRA) both reported that subdued consumer spending and high costs of doing business have rocked the sector and a retail recovery is long overdue.
ARA chief industry affairs officer Fleur Brown said the recent cut is a step in the right direction.
“This should provide modest relief to households, helping restore spending confidence and set a more optimistic tone for 2025,” Brown said.
“While a lower cash rate will help ease some of the strain on businesses and consumers, we need to see this momentum continue. Retail represents almost one fifth of our gross domestic product – we can’t have an economic recovery without a retail recovery.
“However, with the past year of retail performance tracking well below five-year trends we need to see continued focus on restoring confidence.
Brown also noted the flow-on impact of any interest rate changes to retail is likely to have a lag effect.
NRA interim CEO Lindsay Carroll said the cash-rate cut offers a much-needed boost to retail and consumer sentiment, but a lot more work needs to be done.
“The rate cut is a great start, but with a Federal Budget and election around the corner, retailers are looking for signals around sustainable economic growth,” Carroll said.
“For our $430 billion retail sector to thrive, we need to see focused policy making around areas such as combatting retail crime, strengthening supply chain resilience and bolstering small business support.
“Retailers, especially small businesses, are vital to the economy and contribute to job creation in local communities across Australia. The success of businesses in a community reflects the community's overall well-being.
“As the nation’s largest private sector employer, it’s vital that retailers—both small and large—are given the confidence to continue investing in their businesses through the critical months ahead.”