Rate Cut The "Tipping Point": Retailer

Written by Oonagh Reidy     08/05/2013 | 08:56 | Category: INDUSTRY

Will rate cut mean business?: Rates are at one of the lowest levels in history, but will it make a difference to consumer spending?

Rate Cut The

Retailers may breathe a sigh of relief after RBA's decision to cut interest rates by 25 basis points to 2.75 per cent, yesterday.  

"RBA cuts the cash rate by to 2.75% & @NAB follows suit by cutting their rate by the full amount. All eyes on @CommBank @ANZ_AU and @Westpac," Consumer group Choice tweeted after the announcement by the Reserve Bank on Tuesday. 

And three out of the four big banks (NAB, Commonwealth Bank and Westpac) did deliver, all announcing yesterday they would indeed pass the rate cut on to consumers, with ANZ set to decide 'to cut or not to cut' at a meeting to be held on Friday.  

ING and Bank Of Queensland also confirmed they would be lowering their standard variable mortgage rates. 
 
The unexpected rate cut also helps throw some cold water over the ever rising Aussie dollar. The rate is at one of the lowest levels ever since the Reserve took control of monetary policy in 1900. 

Betta CEO Graeme Cunningham says the latest rate cut is part of a better outlook in general for retail, in 2013.

"I think there has been signs of an improvement in retail generally, and hopefully this cut will be the tipping point," he told CN. 

Growth in Australia was a bit below trend in the second half of last year, and this appears to have continued into 2013, noted Glenn Stevens, RBA Governor in a statement yesterday. 

"With the peak in the level of resources sector investment likely to occur this year, there is scope for other areas of demand to grow more strongly over the next couple of years. 

"There has been a strengthening in consumption and a modest firming in dwelling investment, and prospects are for some increase in business investment outside the resources sector over the next year." 

More good news for consumers as inflation is also on target, the CPI rose by 2.5 per cent over the past year, which is actually "a little lower than expected." Stephens noted.  

The Australian Retailers Association (ARA) said the rate cut means some breathing room to retailers and consumers alike  and showed that the RBA was looking at the bigger picture, said ARA Executive Director Russell Zimmerman

"With retail sales showing no sustained growth over the past few months amid weak consumer sentiment, the RBA has provided some relief to retailers."

"Consumers have also been granted some relief from their household budgets as they continue to grapple with covering expected increased utility costs and tax hikes."

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