Retaillers concerned interest rate rise will dampen market

By Martin Vedris

SYDNEY: Strong retail trade figures, rising inflation, building approval increases and record low unemployment levels point to a possible interest rate increase when the Reserve Bank meets tomorrow, but Australian retailers are hoping rates remain steady.

“Obviously we’d like to see interest rates remain at current levels because business has been going along very well over the past six months,” Berny’s Retravision proprietor, Mark Casper, told Current.com.au today.

The Reserve Bank meets on the first Tuesday every month to discuss whether to increase, decrease or maintain interest rates, with official cash rate sitting at 6.25 per cent since November 2006. The average basic variable home loan rate has been 7.50 per cent since November 2006.

If rates do rise, it is predicted that they will go up by 0.25 per cent.

Meanwhile, as the Prime Minister shifts blame to the states for rising interest rates ahead of the impending federal election, and Macquarie Bank’s head of economics, Richard Gibbs looks at fundamental macroeconomic reasons, such as the resources boom, proprietor Mark Casper looks to simply get on with the job of selling products.

“If we were to have an interest rate increase it would put a bit of a dampener on things. Once they announce the election date it will slow things down as well, so if we have an interest rate rise and an election announcement in a reasonably short term, we might get a bit quiet.

"But it’s still going to be a strong Christmas with LCD sales and flat screen sales generally,” Casper said.

Saeid Mazaheri, proprietor of Saints Betta Electrical in St Leonards, NSW, also hinted that a possible rate rise could affect sales.

“There are quite a few factors that affect sales like petrol prices and interest rates and whenever there is talk of interest rates going up, the market gets a bit jittery,” said Mazaheri.

“If there is a rise there is less money to go around because people have to spend more on their mortgages and other loans. So their priorities change and they have less cash to spend.”