Australia’s peak retail body, the Australian Retailers Association (ARA), says today’s decision by the Reserve Bank of Australia (RBA) to increase the cash rate to 4.35% is a significant blow for the retail industry heading into the all-important Christmas and holiday trading period.
The decision will have further repercussions for Australia’s Christmas sales performance, which has already showed significant softening in wake of the cost-of-living crisis.
ARA CEO Paul Zahra said the decision dampened retailers’ “cautious optimism” heading into Christmas.
“Retailers and Australians are already under significant pressure, and Melbourne Cup Day’s rate increase will only pile on further pressure,” Mr Zahra said.
“This rate increase will have a significant impact on discretionary spending, at a time where many retailers are struggling to remain sustainable due to the rising cost of doing business.
“Christmas and the holiday season are when discretionary retailers make up to two-thirds of their profits to sustain them during the winter months and hence, they will be devastated by today’s decision.”
ARA CEO Paul Zahra said the retail industry – particularly small business – is still reeling after 12 interest rate hikes between May 2022 and June 2023.
“Continued interest rate hikes have the dual effect of reducing customer spending whilst also increasing business costs – during a time where the industry is already under enormous pressure,” Mr Zahra said.
The ARA and Roy Morgan predict shoppers will spend $66.8 billion between the start of November and Christmas Eve, essentially the same as in 2023.
The projected spend will be impacted with today’s monetary decision.
“In context, having the same level of Christmas spending as last year is concerning, particularly given we’ve seen the population grow by more than one million1 over the past year with more migrants returning as well as international students and inbound tourism along with price increases by unavoidable supply chain cost increases, particularly in food.
“Today’s decision will make the next two months a very nervous period for retailers.”