Interest rates: the impact on retailers


Shopping bagsThe Reserve Bank of Australia’s (RBA) has left cash rates unchanged at 2.5 per cent for the 14th consecutive month, with talk it could remain there until early 2015.

In a release accompanying the decision, governor Glenn Stevens retained his familiar line the “most prudent course is likely to be a period of stability in interest rates”.

National retail bodies are hopeful the low interest rates will help instil consumer confidence, but warn retailers to remain cautious coming into the busy Christmas period.

Newly appointed Australian National Retailers Association (ANRA) CEO, Anna McPhee, said the current period of stability should instil a level of confidence amongst consumers. Despite August’s flat retail sales result, the sector is experiencing some of the best trading conditions in a number of years.

“Retailers however remain cautious, as local, economic and political uncertainties hamper the improvement of consumer confidence,” said McPhee.

“We would hope the current stability of interest rates translates into a strong Christmas trading period and contributes to current projections of reaching annual retail turnover growth of six per cent by the end of the year,” she said.

Russell Zimmerman, executive director of the Australian Retailers Association (ARA), said the decision to keep the cash rate on hold may not provide enough support to retailers as the crucial festive season approaches.

Zimmerman said consumer confidence remains extremely fragile after ABS figures released last week indicated monthly retail sales for the month August increased only 0.1 per cent (month on month).

“While we are hopeful that September figures (to be released in November) will highlight positive growth with the change in season encouraging consumers to update their wardrobes, it is imperative that the Federal Government and RBA now do all that they can to ensure that retail trade is fully supported. The festive season is fast approaching and interest rates must remain low in order to support business.

“There has been talk that interest rates may start to rise in 2015 but retailers believe the RBA will need to continue to support the economy via low interest rates for some time. The RBA remains one of the few central banks able to offer that support to the economy globally.

“With Christmas right around the corner, retailers have already started to invest in new marketing strategies including hiring and training Christmas casuals. The cost of doing business is increasing daily. Now is the time for the RBA to lower interest rates and aid retail growth,” Zimmerman said.

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