The Reserve Bank of Australia’s next cash rate decision in August will determine the fate of retail’s biggest trading season: Christmas.
This is according to the National Retail Association, which has just welcomed Deputy Governor Andrew Hauser’s comments that the Reserve Bank will consider declining retail trade before the Reserve Bank meets in August.
NRA director Rob Godwin said retail sales have fallen through the floor since the rate hike in November 2023 torpedoed retail’s Christmas sales season last year.
Fashion has been one of the hardest-hit industries, with its monthly sales declining by $160.7 million from February to April according to the latest data from the Australian Bureau of Statistics (ABS). This is from a peak of $3.08 billion in February to $2.92 billion in April.
Between April 2023 to April 2024, fashion sales have plummeted by $76.2 million, and have been gradually falling in trend terms since July 2023.
Meanwhile, overall retail sales have declined by $104.3 million from February to April to $35.71 billion, but have risen by $449.8 million year-on-year. Despite the growth between April 2023 and April 2024, the amount is two-thirds lower than overall retail spend between April 2022 to April 2023, which was then $1.41 billion.
“Retailers will be holding their breath over the next six weeks leading up to the Reserve Bank's decision, which could make or break their biggest trading season,” Godwin said.
“If the Reserve Bank decides to raise interest rates at its next meeting, at a minimum it would significantly weaken consumer demand, forward orders and employment in the lead-up to the critical trading periods of November and December and, at worst, potentially trigger a sector-wide recession in retail.”
Godwin said retailers are pleased the RBA has opted against a knee-jerk reaction to the annual inflation increase from 3.6 per cent in April to 4 per cent in May, as indicated by the CPI report from the ABS.
“However, retailers are not out of the woods yet,” Godwin said. “Business owners are still facing an onslaught of rising overhead costs and the best thing the Reserve Bank can do for retail is ensure consumer spending isn't put under any more pressure.
“The ABS will release retail trade data for May and June in the coming month, the results of which are anticipated to be a regression in real terms given our population growth.
“Australia’s business economy needs to improve its viability for new investment, and it won’t be unless policymakers step up and loosen our operational setting and re-energise the market.
“We implore the Reserve Bank stays true to the comments made by the Deputy Governor and consider struggling retail trade before their critical meeting in August.”
Speaking at a forum on June 27, Hauser said there is a lot to reflect on ahead of the meeting in August.
“There's a whole series of data coming out between now and when we meet in August,” Hauser said. “There are two measures of retail sales, which have been on the floor. There's an important release on employment, and there's the Q2 inflation number. There's business surveys - you name it.
“It will be a bad mistake to set policy on the basis of one number, and we don't intend to do that.”