Australia’s peak retail body, the Australian Retailers Association, has welcomed the Reserve Bank of Australia’s decision today to pause interest rates at 4.1% but remains concerned about the ongoing economic pressure for mortgage holders and retailers.
The decision comes after the latest Australian Bureau of Statistics retail trade data revealed most categories have plunged into decline amid a discretionary spending slowdown and cost-of-living pressures.
ARA CEO Paul Zahra said the retail industry – particularly small business – is still reeling after 12 interest rate hikes since May 2022.
“We welcome this further pause of the cash rate by the RBA which will help bolster business confidence and gives us cautious optimism around whether interest rates may be lowered in the near future.”
“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 data suggests that inflation has peaked, so it is clearly important to carefully consider the repercussions of interest rate increases on Australian mortgage holders and businesses.
“There is a lag effect around cost-of-living pressures in retail, and the full impact of interest rate rises are yet to be felt, with many hundreds of thousands of mortgage-holders still tipped to roll off fixed rate loans this year.
“Similarly for retailers, we expect many significant leasing cost increases and other cost of doing business impacts are still yet to come.
Mr Zahra pointed to the latest retail trade data as a bellwether of the discretionary spending slowdown.
“For the first time this year, department stores, clothing, footwear and accessories and other retailing joined household goods in the realm of a year-on-year spending decline,” he said.
The ABS last week revealed the annual rate of headline inflation fell to 6 per cent in June. The annual inflation rate was at 7.8 per cent in the December quarter.
