Tuesday’s interest rate cut by the Reserve Bank of Australia (RBA) has been welcomed by retailers and other industry groups.
The bank lowered the cash rate to 3.60 per cent from 3.85 per cent, following last month’s unexpected decision to hold rates steady.
The Australian Retailers Association (ARA) and National Retail Association (NRA) welcomed the move, with ARA CEO Chris Rodwell saying it delivered “two clear messages”.
“First, given retail growth and consumer confidence remain subdued, it’s vital the RBA remain open to further cuts in 2025,” he said.
“Second, it’s critical the banks act now to pass on the full rate cut.”
Rodwell noted that retailers were already contending with higher rents, wages, energy, insurance and supply chain costs, as well as rising retail crime and competition from ultra-low-cost online players such as Temu and Shein.
“On top of these challenges, businesses are tied up in regulatory reform, navigating the biggest set of workplace changes in decades,” he said.
“Many small businesses simply don’t have the resources to cope. That’s why Australia needs a bold agenda on productivity and red tape reduction.”
In its statement, the RBA said forecasts point to a sustained recovery in household consumption as real incomes rise. However, it acknowledged uncertainty, with some businesses still reporting weak demand and difficulty passing on cost increases.
“There are also uncertainties regarding the lagged effects of recent monetary policy easing and how firms’ pricing and wage decisions will respond to the balance between aggregate demand and potential supply, labour market conditions, and continued weak productivity outcomes,” the RBA added.
Circana’s MD Apac, Paul Hinds, said the much-anticipated rate cut would be welcomed by both households and retailers.
“While the broader macro-economic outlook remains difficult to predict, this decision will add confidence to the market that, whilst slow, the economy is recovering.”
Circana research shows Australians are continuing to prioritise essential purchases – with grocery and pharmacy categories experiencing strong growth, while discretionary spend in other categories such as liquor and petrol remains low or declining.
“Economic pressures are beginning to ease; however, we expect Australians to still be conservative with their spending as global uncertainty persists.”
However, Joel Gibson, consumer finance expert at Zyft, said while the cut marked “a cautious step in the right direction” it won’t shift the dial for most households or businesses just yet.
“Rates remain well above where they sat just a few years ago, and many Australians are still doing it tough.”
