The Australian Retailers Association has slammed the Reserve Bank for raising its interest rates by 25 basis points to 3.25 per cent, and the damaging effects this will have on sales in the lead up to Christmas.
According to the ARA executive director Russel Zimmerman, the Reserve Bank has repeated history by ignoring retailers’ pleas to maintain interest rates. Zimmerman warned that the decision may have a damaging effect on Christmas retail trade.
“This premature rate rise is all too familiar to retailers who warned the RBA not to raise interest rates in early 2008 because retailers could see consumers were reducing spend. The RBA ignored this advice and what followed was over 12 months of reduced consumer demand,” he said.
“For most of this year, retail recovery has been quite patchy. There was increased monthly trade in January, March, April, May and now August but decreases in February, June and July.”
Zimmerman said that retailers needed a few more months before the official rate was increased.
“Retailers would’ve liked to have seen a few more months of solid trade growth before any interest rate rises and they will definitely not welcome any interest rate hikes in the lead up to Christmas,” he said.
“Usually changes to interest rates take between three to six months to impact the retail market. So, the damage from today’s decision could hit retailers just in time for Christmas.”
Zimmerman was adamant that the RBA should hold off on the rate rise.
“Retailers are urging the RBA to carefully rethink their interest rate strategy and to hold interest rates between now and Christmas as consumers are still extremely sensitive to any financial or economic pressures,” he said.
“This rate rise will take cash away from consumers, damaging retail recovery and stopping funds from flowing through the rest of the economy.”