Retailers and economists are in shock after the Reserve Bank of Australia (RBA) did not reduce the base interest rate on Tuesday, as was widely anticipated.
In a rare event, the decision to hold the interest rate at 3.85 per cent was a divided one, with six board members voting to keep the rate steady and three voting against.
Economists had widely predicted a cut, and financial markets had factored in a 96 per cent chance of a 0.25 percentage point cut.
“With the cash rate 50 basis points lower than five months ago and wider economic conditions evolving broadly as expected, the board judged that it could wait for a little more information to confirm that inflation remains on track to reach 2.5 per cent on a sustainable basis,” said the Monetary Policy Board in a statement.
The Australian Retailers Association (ARA) and the National Retail Association (NRA) said retailers were disappointed by the decision as the sector struggles with weakened consumer spending and high business costs.
The organisation had predicted a turning point over the second half of the year, provided the RBA would further cut cash and interest rates to support income growth, leading to increased retail performance.
“With inflation well within target range, today’s RBA decision is a missed opportunity to bolster the outlook of operators around the country,” said ARA CEO Chris Rodwell.
“Retailers have been battling higher costs of doing business across the board – rents have spiked, we’ve seen significant wage and superannuation rises, along with higher energy, insurance and supply chain costs and unfortunately, an enormous wave of retail crime,” he said.
Rodwell further called for red tape reduction to help lift Australia’s $430 billion retail sector.
Meanwhile, 82 per cent of shoppers have been found to ‘promo load’, where one stocks up on products that are on sale, while 81 per cent actively seek out discounts when shopping, according to consumer goods data provider Circana.
The company said consumer confidence was fragile as a result of global tariffs, geopolitics and economic outlooks creating an uncertain environment.
