By Chris Nicholls
SYDNEY: The Australian National Retailers Association (ANRA) has urged the RBA to be cautious about further interest rate hikes after the bank raised interest rates 25 basis points yesterday.
The RBA’s announcement yesterday took the official rate to 7.25 per cent and marked the third rise in four months.
ANRA chief executive Margy Osmond said the rise could slow the economy and alter consumer activity.
“This latest increase is likely to generate a slowing and change to consumer activity particularly, in the low income mortgage belt rather than across the entire retail sector.
“We would urge the RBA to exercise caution about any additional rate hikes before the true impact of the 2007 and latest increases can be more accurately gauged outside of a seasonal peak over the holiday season.
Osmond said while the retail sector had enjoyed a strong Christmas and New Year, the recent rate increases were starting to bite.
“The retail sector had strong results over the Christmas/New Year period however, there are indications that previous interest rates have begun to bite and are generating a slowing of the growth trend of 2007.”
However, Osmond said the impact could be uneven in various retail sectors.
“The impact of rate increases are likely to generate a patchy rather than whole of retail response. With approximately 30 per cent of Australians paying off a mortgage, the lower income and falling house value areas, particularly in capital cities, are likely to see the impact on spending before and more deeply than other demographic zones. Self funded retirees will see a positive in their capacity to spend.”
She pointed to strong recreational goods and department store sales as a positive.
“Despite signs of a slowdown in consumer spending sales of books, games and other recreational goods continued to grow up 3.4 per cent in January and 14.8 per cent for the 12 month period,” she said.
“Department stores also continued to perform strongly recording an increase of 1.8 for the month of January.”
Bundaberg Retravision owner Steve Ortt was quoted in Bundaberg and Region News Mail, though, as saying rate rises seemed to have only a temporary effect, and even then mostly on luxuries, such as home theatre systems.
"Things like fridges are necessities, so people can’t put off buying one, it is the home theatres and the surround sound systems that slow down. Every time the interest rate has gone up things have slowed down for a little while, but then everyone forgets about it and gets on with life," he said.