Retailers have called the decision from the Reserve Bank of Australia a welcome confidence boost but warned tough times are far from over for the sector.
Peak bodies, the Australian Retailers Association (ARA) and National Retail Association (NRA), said subdued consumer spending and high costs of doing business have rocked the sector and a retail recovery is long overdue.
“The Reserve Bank’s decision to cut the cash rate to 4.10% is a step in the right direction. This should provide modest relief to households, helping restore spending confidence and set a more optimistic tone for 2025,” said ARA Chief Industry Affairs Officer Fleur Brown.
“While a lower cash rate will help ease some of the strain on businesses and consumers, we need to see this momentum continue. Retail represents almost one fifth of our gross domestic product – we can’t have an economic recovery without a retail recovery. However, with the past year of retail performance tracking well below five-year trends we need to see continued focus on restoring confidence.
Ms Brown also noted the flow-on impact of any interest rate changes to retail is likely to have a lag effect.
NRA Interim CEO Lindsay Carroll said the cash-rate offers a much-needed boost to retail and consumer sentiment, but a lot more work needs to be done.
“The rate cut is a great start, but with a Federal Budget and election around the corner, retailers are looking for signals around sustainable economic growth,” Ms Carroll said.
“For our $430 billion retail sector to thrive, we need to see focused policy making around areas such as combatting retail crime, strengthening supply chain resilience and bolstering small business support.
“Retailers, especially small businesses, are vital to the economy and contribute to job creation in local communities across Australia. The success of businesses in a community reflects the community’s overall wellbeing.
“As the nation’s largest private sector employer, it’s vital that retailers – both small and large – are given the confidence to continue investing in their businesses through the critical months ahead,” she said.
The ARA and NRA’s pre-budget submission can be accessed here.
RBA rate cut welcome but don’t expect any further easing any time soon, Ai Group
“The Reserve Bank’s decision to lower the cash rate to 4.1% reflects the progress made on inflation, but should not be seen as a sign that victory can be declared or that the economy is robust,” said Innes Willox, Chief Executive of national peak employer body the Australian Industry Group.
“This decision offers some much-needed relief to businesses and mortgagee households, and will hopefully provide a fillip to kickstart the very weak growth rate in the Australian private sector economy.
“The Bank has made clear that we should not expect another rate cut any time soon because our economy remains exceptionally fragile.
“The reality is that while headline inflation has continued to fall into the target band, the outlook remains subject to considerable uncertainty. Much of this progress has been due to price suppressing budget measures by federal and state governments, whose future path remains uncertain at this stage in the electoral and budget cycles.
“Meanwhile, the global economic outlook is extremely uncertain due to policy shocks emanating from the US. The risk that announced and forthcoming tariffs from the Trump Administration are pro-inflationary and will be transmitted to Australia must be taken very seriously.
“As the RBA rightly notes in its decision, there are risks on both sides of the economic outlook. Monetary policy still remains restrictive, and the job of sustainably delivering inflation to target is not yet over.
“Today’s decision reflects the significant progress made towards restoring stable inflationary conditions, but we must remain on guard for future shocks to our economy.
“The chorus of pressure from government, commentators and market economists on the board in recent weeks has been unprecedented. It is commendable that for what it believes are sound economic reasons the board has resisted this pressure.
“The board and its operations are now more transparent than they have ever been, but that does not provide licence for outsiders to demand it act in a particular way that suits their interests.”
