Retailers say ‘bah humbug’ at RBA rate hold

Retailers hoping for a cheeky pre-Christmas rate cut to get customers splashing cash have voiced their disappointment at the Reserve Bank’s  (RBA) decision to keep rates on hold.

Inflation has cooled since the big spike in 2022, but hasn’t exactly tamed, so the RBA has decided to play it safe. The Board said some prices are proving stubborn, and it wants more time to see how earlier cuts are playing out before pulling the trigger again.

A rate cut would’ve been a cracker

The Australian Retailers Association (ARA), backed by the National Retail Association, voiced its disappointment at the RBA’s decision.

“A rate cut would have given a great boost for retailers across the nation in the lead up to peak season,” ARA CEO Chris Rodwell said.

He explained that many stores make up to two-thirds of their yearly profits in the silly season.

“This important period is when businesses replenish their cash reserves,” he added. So a bit of consumer confidence could go a long way.

Shops still copping it from all angles

Even though sales have started to tick up, Rodwell says rising rents, wage hikes, soaring energy bills and insurance costs are still smashing shop owners. Then there’s supply chain headaches, workplace changes and, to top it off, a wave of retail crime.

While Aussie retailers battle those costs, they’re also competing with global online giants who can flog goods dirt cheap without the same obligations here at home.

“Continued regulatory reform and workplace changes are stretching small businesses beyond their capacity,” Rodwell warned.

Retail: a big piece of Australia’s pie

The retail sector makes up nearly a fifth of Australia’s GDP and employs one in ten Aussies. It’s a $430 billion chunk of the economy. If retail sneezes, the rest of the country catches a cold.

That’s why Rodwell wants more than interest rate cuts. He’s pushing for action on retail crime, cutting red tape and giving small operators a fairer crack at competing with global players.

“A stronger economic trajectory can’t happen without a retail recovery,” he said. “To encourage sector recovery, we’re keen to see a rate cut this side of Christmas.”

Why the RBA is playing Scrooge

From the RBA’s perspective, though, the picture looks a bit different. Private consumption is picking up as incomes rise, housing is bouncing back, and the labour market is still tight-ish.

The RBA’s concern is that inflation hasn’t fully behaved. September numbers might even come in hotter than expected. And with productivity growth still sluggish and unit labour costs stubbornly high, the RBA isn’t ready to hand out an early Christmas present.

It seems that the RBA would rather be cautious than risk a price surge just when economic conditions appear to be stabilising.

While retailers on the ground might be happy that at least interest rates aren’t going up, the downside is, that neither is consumer confidence.

So if you’re banking on the silly season to top up your coffers, you’ll need to work harder to entice shoppers who are still feeling cautious.

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