The Australian Retail Council (ARC) says today’s decision by the Reserve Bank of Australia to lift the cash rate to 4.1 per cent from 3.85 per cent, will dent the retail sector with businesses facing a fresh surge in supply chain costs driven by escalating global oil prices.
ARC CEO, Chris Rodwell said retailers are confronting a difficult combination of rising costs and pressure on consumer spending.
“Retail is again facing a double hit — rising supply chain costs from the global oil shock and a rate rise that will likely further squeeze household spending,” he said.
Mr Rodwell said the sector had endured a challenging adjustment period in the past few years as households responded to higher interest rates and rising living costs following the pandemic.
“Retail businesses have been operating under extremely tight margins as the cost of doing business has continued to rise,” he said.
“Through the second half of last year and into January this year, we began to see stable conditions return. Growth was not extraordinary, but it was solid and steady. Consumers remained highly value-conscious, with spending concentrated around promotions and discounting as households looked to stretch their budgets. That meant retailers were working harder to maintain margins, even as trading conditions began to stabilise,” he said.
Mr Rodwell said the recent escalation in the Middle East and resulting spike in global oil prices places fresh pressure on retailers.
“Higher interest rates can reduce household disposable income and confidence. The risk is retailers face rising cost inputs at the same time consumer spending could slow again.”
Australia’s retail sector generates around $444 billion in annual turnover and employs one in ten Australians, meaning a slowdown would have broader implications for the national economy.
“When the retail sector comes under pressure, the broader economy feels it very quickly,” Mr Rodwell said.
Mr Rodwell said the 2026 Federal Budget presents an opportunity for government to ease structural pressures facing the sector.
“Retailers are looking for practical steps to reduce the cost of doing business and support economic growth. That includes serious efforts to minimise the fragmentation and duplication of cross-border rules and regulation that create unnecessary compliance and complexity for businesses operating nationally,” he said.
Recent ARC and Mandala research found inconsistent state and territory regulations is imposing a growing economic penalty, showing regulatory fragmentation will wipe $26 billion from national GDP over the next decade and add more than $9 billion to Australians in household costs.
“At a time when households and businesses are facing rising fuel and borrowing costs, the focus must be on reducing unnecessary regulatory burden and supporting business confidence.”
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