News Articles

Shoppers Restrict Post-Christmas Spend - RBA Needs to Rethink Interest Rate Strategy – ARA

Peak retail industry body the Australian Retailers Association (ARA) said its internal consumer spending modelling today indicates the 2007 / 2008 post-Christmas sales period was softer than original forecasts, confirming the Reserve Bank of Australia (RBA) acted prematurely by raising rates.

According to ARA Executive Director Richard Evans, Australian consumers began restricting their spending from New Year’s Day onwards starting a downturn that will last at least two more quarters.

“Our estimated sales figures for the post-Christmas sale period – from Boxing Day to mid January 2008 have been revised downwards from $6.2 to $6.1 billion. When there has been acceleration in previous cycles, it stopped as quickly as it rose. This is what we are seeing in the post-Christmas figures when consumers decided to slow down in their expenditure. Our modelling is very accurate – as proven during the peak Christmas buying period – so maybe the RBA should needs to rethink its high interest rate strategy,” Evans said.

“Australian consumers were already restricting their spend and as we have been saying, the rate rise from November is still yet to be fully absorbed and reflected in consumer spending habits.”

Figures from the ARA show the current retail cycle peaked at Christmas and was stronger than originally predicted. The cycle accelerated in its growth from August through to December 2007.

“Apparel in many of the cycles has always been the leader in the downtown. This combined with the seasonal impact of a very poor spring/summer and significant discounting prior to Christmas when retailers were over-stocked caused this. The recreational sector has been in decline now for at least six months and continues to fall.

Household spending has held up on the strength of the introduction of high definition TV which is now being rolled out following the announcement that the current analogue TV broadcast will begin to cease in the metropolitan areas in 2009. There has been a substantial cost reduction in the price of plasma and LCD sets but the per unit dollar cost is high, hence the increase.

According to ARA estimates post Christmas figures are as follows:
Department stores accounted for $1.007 billion (original estimate $995 million), Apparel $924 million (original estimate $938 million), Household $2.45 billion (original estimate $2.3 billion), Recreational $497 million (original estimate $555 million), Other $1.28 billion (original estimate $1.3 billion).

By state: NSW $2.03 billion. Vic $1.4 billion, Qld $1.3 billion, WA $678 m, SA $431 million, Tas $128.5million, ACT $118 million and NT $60 million.

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.

Download

Options:

View Archives