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RBA listens to struggling retailers as rates hold - economy balanced on gossamer thread

Peak retail industry body the Australian Retailers Association (ARA) said the retail trade trend estimates released last week have helped send a strong message to the Reserve Bank of Australia (RBA) as interest rates remain unmoved since March 2008.

"The RBA's decision to yet again keep the cash rate unchanged at 7.25 per cent reflects the gossamer thread the Australian economy is currently balanced on. We were alarmed early this year by successive rate increases and called for a steady hand from the RBA. The ARA has said all along that the rate increases in November 2007 were yet to be felt through the economy and that the February and March rate increases were premature and damaging - unfortunately our predictions were correct.

"We could see consumers reining in their spending post Christmas with Boxing Day sales down on previous years," Evans said.

"With retail trade trends showing no change in June 2008 and a turnover decrease of 3.9% compared with May 2008, tough times are predicted for Australia's economy. The retail sector is the barometer of the economy and if it's struggling it's a sure sign times will continue to toughen for the broader economy as ten years of economic sunshine come to an end.

"We are in an eclipse and we don't know yet if it's a ‘total' eclipse," Evans said.

"Today's decision by the RBA shows it has again responded to retailers and consumers and continued to listen to those battling in this economy and allowing the natural market forces to correct itself. The concern we have is that petrol prices are continuing to rise placing more pressure on grocery prices. This is going to further bite into the already tight purse strings of average Australians and put pressure on retailers as discretionary spend declines," Evans said.

For over 104 years, the Australian Retailers Association (ARA) has been the peak industry body in Australia's $292 billion retail sector which employs over 1.2 million people. As an incorporated employer body under the Workplace Relations Act and with a range of member services including business consulting, policy development, advocacy and education, the ARA promotes and protects over 5000 independent and national retailers throughout Australia. Visit www.retail.org.au or call 1300 368 041.

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