l successive rises put the weekly shop under sharper scrutiny. “When so many living costs feel out of our control, the supermarket is one of the few places where we can still make active choices and feel a little more in control,” he said. The result is more trading down and greater openness to private labels, though expectations remain high. “Shoppers don’t want those new brand choices to feel second best. They want to feel smart, careful and on the front foot.” An uneven burden The rise, effective from 2:30pm on Tuesday, is the third this year and prolongs a sequence aimed at slowing inflation. When the RBA lifts rates, it aims to ease inflation by slowing spending, though the effect is usually uneven, with households and businesses bearing much of the immediate cost. At the moment, inflation is currently sitting at 4.6 per cent, well above the bank’s 2–3 per cent target, and according to the RBA, is expected to peak at 4.8 per cent in June. In this afternoon’s media conference, Governor Michele Bullock made the stakes clear in characteristically direct terms, “We’re staring down the barrel.” Fuel, rents and services continue to feed into everyday costs, with those increases now pouring into retail pricing. “We have a situation in Australia prior to the war, where we had demand above supply,” Bullock said. In simple terms, people and businesses were spending more than the economy could keep up with, which pushed prices higher. “The ability of the economy to supply the goods and services that were being demanded was outstripping the ability of the economy to supply it.”  Raising rates is the RBA’s way of easing that pressure. However, higher borrowing costs move quickly through mortgages and business lending, tightening spending at the margins. The bank itself has described its current stance as “a bit restrictive,” giving it “space to see how the conflict plays out and the response of Australian households and businesses to the shock.” For retail, the consequences are prompt and assessable. The Australian Retail Council expects conditions to tighten further, considering this is a third consecutive increase. Its chief economist, Glenn Fahey, said the latest move would place pressure on both sides of the transaction. “With household budgets under strain, a third consecutive rate rise is expected to reduce spending, especially on non-essential items,” he said immediately after the announcement. Retailers are already contending with rising costs across wages, energy, rent and logistics, even as customers are growing more purchase-savvy and cautious. During the RBA’s post-COVID tightening phase, household consumption slowed materially, with discretionary or “non-essential” spending absorbing the impact. The Australian Bureau of Statistics shows supportive data: in 2024, discretionary spending grew just 0.6 per cent over the year, compared with a 5.8 per cent rise in non-discretionary categories. The current environment carries those same characteristics, though arguably, with added intensity. Supply chain conditions have worsened for three in four retailers, according to ARC survey data, and half expect disruption to persist for at least six months. Stubborn inflation Inflation itself remains broad-based and persistent, shaped by both domestic demand and, unsurprisingly, global disruption. “This oil shock has been driven by what’s going on in the Middle East. This has complicated things immensely,” Bullock said. Higher fuel and fertiliser costs are filtering through supply chains, placing pressure on growers, transport and ultimately retail pricing.  Retail Drinks Australia warned the impact could intensify as tax settings respond to inflation. In a letter to Treasurer Jim Chalmers, the group warned: “The retail liquor sector is deeply concerned about the flow-on effects. An artificially inflated excise hike leaves liquor retailers with the difficult choice to either absorb these costs or pass them directly onto consumers.” The gaze now shifts to the Federal Budget, to be handed down next week, where the next answers will be expected. The Australian Retail Council is calling for a more intentional and purposeful response to the pressures building across the sector. “The Federal Budget must focus on practical reforms that reduce costs, improve productivity and reduce the cost of doing business,” Fahey said. The group is advocating for a nationally consistent approach to cutting red tape and regulatory duplication, alongside targeted action to reduce high-friction compliance measures, primarily for small businesses. It is also pushing for modernised tax settings to boost investment and competitiveness and, lastly, relief to ease freight, logistics and energy costs. “These are measures that can ease cost pressures and support businesses through a challenging trading environment, which will flow through to lower prices for Australian households.”