Australian retailers have welcomed the Reserve Bank of Australia’s (RBA) move today to lower interest rates to a record-low 2 per cent, however, ahead of the federal budget, have warned additional government support is also needed to boost business and consumer confidence.In the RBA’s statement accompanying the decision, which saw the cash rate lowered by 25 basis points, RBA governor Glenn Stevens noted “available information suggests improved trends in household demand over the past six months and stronger growth in employment”.
“Looking ahead, the key drag on private demand is likely to be weakness in business capital expenditure in both the mining and non-mining sectors over the coming year,” Stevens stated.
“Public spending is also scheduled to be subdued. The economy is therefore likely to be operating with a degree of spare capacity for some time yet.”
Stevens stated the board had “judged that the inflation outlook provided the opportunity for monetary policy to be eased further, so as to reinforce recent encouraging trends in household demand”.
Australian National Retailers Association CEO Anna McPhee stated the retail sector welcomes the rate cut.
While record-low cash rate levels will boost consumer consumption, McPhee said the sector anticipates the full effect of the cut “will take some time to flow through the economy”.
“The RBA’s decision to stimulate the economy is welcome, but this represents only one part of the measures that can boost both business and consumer confidence,” McPhee commented. “We encourage governments to consider the long-term impact of not tackling important reform to promote economic growth and create jobs.
“Ahead of next week’s federal budget, retailers are wary of the potential impacts of the budget to consumer confidence given the downward effect last year.”
Australian Retailers Association executive director Russell Zimmerman said the RBA’s decision is a step toward building higher levels of business and consumer confidence.
Zimmerman also stressed the need for additional government support ahead of the budget.
“While a reduction in rates is always welcomed, this alone is not enough to stimulate business and jobs growth,” he stated. “Retailers are now looking ahead to the federal budget to ensure small business tax cuts are being delivered in order to boost their bottom lines.
“Low interest rates are acting to support borrowing and spending and today’s rate cut is certainly a positive step, however, business growth must still be supported with a solid plan in the upcoming federal budget.”