The Reserve Bank of Australia’s (RBA) decision to leave interest rates unchanged has drawn mixed feedback on the impact it will have on retailers. The cash rate has been at a record low of 2.5 per cent for 12 months. Grant Saligari, research analyst at Credit Suisse, believes interest rates will remain broadly stable through the course of this year, and this will benefit retailers. “I think retailers mainly like stability, so as long as we’ve got stable policy settings that creates
a reasonably conducive environment for retailers.”
Saligari says that discretionary retailers may be relatively more sensitive to interest rates, but department stores, clothing retailers, and household goods retailers will be more affected by uncertainty and favour the unchanging rates.
“My interpretation of the statement was the Reserve Bank is quite comfortable with the inflation outlook, quite comfortable that wage pressures are moderating, quite comfortable that house price pressure has moderated a little, and it sees the economy on a path to rebalancing,” he said.
Margy Osmond, CEO, Australian National Retailers Association (ANRA) agrees that retailers welcome stability, but thinks both retailers and consumers are cautious this may come to an end in the not too distant future.
“This long period of stability has most definitely helped the retail sector. Retail figures for June showed a rise of 0.6 per cent for the month. If June’s strength continues and momentum carries forward in the second half of the year, we would expect retail sales to be up around the six per cent mark (year on year) by the end of the year,” Osmond said.
On the opposite side of the spectrum, Russell Zimmermann, executive director of the Australian Retailers Association (ARA), believes retailers would have benefited from a drop in the interest rates, and has urged the RBA to lower interest rates at its next meeting in order to aid retail growth.
Zimmerman said despite a recent uplift in retail sales, consumer confidence remains fragile, and lowering interest rates today would have been a step in the right direction for the retail sector.
Australian households are struggling to save, with 46 per cent saying they were able to save each month, down from 49 per cent in December.
“Although the retail sector finished the 2013-14 financial year on a relatively strong note, recovering somewhat in June from the post-Federal Budget downturn, the reality is that this activity will be short lived.
“Consumer confidence often shows a dip in sales between August and October and it is now imperative that the Federal Government do all that it can to ensure that retail trade does not suffer as we gear up toward the spring/summer racing season and also the Christmas trading period,” said Zimmermann.
