RBA rate cut

The Reserve Bank of Australia (RBA) has cut the cash rate by 25 basis points to a record-low 1.5 per cent.

RBA Governor Glenn Stevens said in a statement the decision took into account the slow growth of the global economy, continuing low commodity prices, low inflation, mixed labour market indicators and the overall sluggish growth of the domestic economy.

Retailers welcomed the news. National Retail Association CEO Dominique Lamb said the flow-on effects from the decision would be keenly appreciated by retailers.

“Lower borrowing rates will flow through to more money in the pockets of consumers, giving them greater discretionary spending power,” she said. “This in turn will boost the retail sector, which is one of the nation’s largest employers – particularly for lower-skilled and part-time workers.”

Australian Retailers Association Executive Director Russell Zimmerman echoed Ms Lamb’s sentiments, saying he expected the cut to boost retailer sales.

“Retail spending growth has fallen since the beginning of 2016, with some states, such as Queensland and Western Australia, suffering with almost stagnant growth,” he said. “This reduction of interest rates will allow consumers greater access to discretionary cash, which we anticipate will result in Australians returning to stores. It’s been a difficult few months for many Australian retailers, particularly those in food retailing and household goods.”

The cut comes on the back of findings in the latest Sensis Business Index survey, which indicated that business confidence rose nine points in the previous quarter among SMEs, to sit at its highest levels in more than five years.

Sixty per cent of SMEs surveyed were confident, compared with 16 per cent that were not, while concern about the economic environment has halved in the same period. At state/territory level, confidence gains were recorded everywhere except Tasmania and the NT.

“While sales and employment improved and prices remained positive, wages and profitability went backwards this quarter,” Sensis CEO John Allan said. “These are not the results you would expect to see when confidence has lifted to a five-year high. Rather than being driven by these indicators, confidence is instead being driven by perceptions that the overall economic environment is improving. On top of this, the non-cyclical influences remain strong, with businesses continuing to feel particularly positive about their own specific business strengths.”

The retail sector remained the second-least positive industry surveyed, with confidence up six points to a lowly 27, driven by difficult business conditions and weak sales.

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