The retail industry has welcomed the Reserve Bank of Australia’s (RBA) decision to cut interest rates by 25 basis points to a historic low of two per cent this week.
NRA CEO Trevor Evans said there was evidence that the February rate cut had prompted an increase in consumer activity, with that month’s retail trade figures showing moderate growth in spending in discretionary categories.
“We always welcome extra cash in the pockets of consumers, and hopefully this rate cut will again boost spending in Australian retail stores,” Mr Evans said.
“However, consumer confidence is also critical for strong retail sales, and if the rate cut raises concerns about the strength and future direction of the economy, then we run the risk that some of the benefits could be undone.”
Mr Evans also said a fairly large amount of any additional spending could go offshore due to the ongoing failure of state and federal governments to close the “GST loophole” for online purchases.
“If politicians and policy makers are serious about boosting domestic economic activity, then they should move to close the GST loophole, which encourages Australians to shop from overseas businesses.
“This would provide an instant boost to local spending, generating higher levels of employment and economic activity.”
Australian National Retailers’ Association CEO Anna McPhee said continued record low cash rate levels will boost consumer consumption, but the retail sector anticipates the full effect of the cut will take some time to flow through the economy.
“Consumers may continue to display caution until after the budget in a week’s time,” she said.
“The RBA’s decision to stimulate the economy is welcome, but this represents only one part of the measures that can boost both business and consumer confidence. We encourage governments to consider the long-term impact of not tackling important reform to promote economic growth and create jobs.”
Australian Retailers Association Executive Director Russell Zimmerman agreed that business growth must be supported with a solid plan in the upcoming federal budget.
“While a reduction in rates is always welcomed, this alone is not enough to stimulate business and jobs growth,” he said. “Retailers are now looking ahead to the federal budget to ensure small-business tax cuts are being delivered in order to boost their bottom lines.”