Retailers fear consumers will curtail spending during the crucial pre-Christmas sales period after the Reserve Bank of Australia’s (RBA) decision to keep the cash rate on hold at 3.6 per cent.

The soon-to-be merged Australian Retailers Association (ARA) and the National Retail Association (NRA) said a rate cut ahead of the spending season would have bolstered consumer confidence and encouraged discretionary spending.

“A rate cut today would have given a great boost for retailers across the nation in the lead up to peak season,” said ARA CEO Chris Rodwell.

“While spending has started to lift, we are not yet at the level where retailers feel assured of a clear shift in the cycle.

“Many discretionary retailers make up to two-thirds of their profits during peak season and use this important period to replenish cash reserves.”

Rodwell said small businesses had only recently begun to see improved trading conditions and that rate reductions by the RBA were key to improving consumer confidence in the retail sector.

Retailers are also struggling with rising rents, higher energy and insurance costs, supply chain challenges, wage growth pressures, and “an intensifying wave of retail crime,” according to Rodwell.

“Global competition is significant, with ultra-low-cost digital retailers capturing a sizeable share of local spending without the same obligations as domestic businesses,” said Rodwell.

“On top of this, continued regulatory reform and workplace changes are stretching small businesses beyond their capacity.”

Rodwell also called for government action on retail crime and measures to cut red tape to improve productivity.

“With one-in-10 Australians employed in retail, our $430 billion sector is crucial to the national economy,” said Rodwell.

“A stronger economic trajectory can’t happen without a retail recovery. To encourage sector recovery, we’re keen to see a rate cut this side of Christmas.”