Rate cut provides cause for retail optimism

Posted by Editorial on 5th November 2008

Peak retail industry body the Australian Retailers Association (ARA) has applauded the Reserve Bank of Australia’s (RBA) decision to further cut the cash rate by .75 percentage points today.

The news of a rate cut is further positive news for the food retail sector, following the release of trend figures for September showing food retailing up 0.6 per cent. Cafes and restaurants, among the hardest hit by the downturn, made a slight comeback – with trend figures climbing 0.2 per cent.

ARA Executive Director Richard Evans said the third cut in three months is great news for consumers who need cash in their pockets and confidence to spend responsibly this Christmas. “The RBA’s decision today to cut interest rates yet again indicates our leading financial regulators are listening to retailers hard hit by months of reduced consumer demand,” he said. “Hopefully this will help turn consumer confidence around and start the upwards trend for retail spending after successive months of stagnant and declining growth.”

“Consumers have the economy in their hands at the moment. The RBA has cut interest rates over three consecutive months and the Rudd Government’s $10.4 billion stimulus package is putting cash back into consumer’s pockets. But now it’s up to consumers to re-enter the marketplace, spend responsibly and allow funds to flow through the economy.”

“This is good news for consumers struggling with limited discretionary spend and great news for retailers fraught with the lowest consumer sentiment since 1992. We are optimistic today’s decision will change conditions for retailers in time for the upcoming Christmas season. We have a fundamentally strong economy and if consumers don’t respond to this good news they are putting their jobs and therefore their livelihood at risk. The RBA has done its job. The Rudd Government has done its job. Now it’s up to consumers to do their job – to save their jobs,” Mr Evans concluded.

The Australian National Retailers Association has also welcomed the RBA decision, as jobs in the retail sector have been threatened  this year.

“Retail sales are a fraction of what they were 12 months ago and this is having flow-on effects in retail employment,” ANRA CEO, Margy Osmond, said. “The latest ABS retail figures show modest growth of just 0.2 per cent in September, compared to 0.7 per cent in September 2007.”

“In the 12 months to August, the retail sector has lost 7,800 full-time jobs,” Mrs Osmond noted. “The highest fall was in Victoria where 20,000 full-time jobs have been lost. In the same period, retailing has gained 10,700 part-time jobs.”

“While some states have been hit harder than others, there is the potential for further job losses if consumer sentiment remains low, especially if consumer sentiment is not reignited by the interest cut or the economic stimulus package,” Mrs Osmond suggested. “All the signs show that Australians are being ultra cautious and will need stronger signs from the broader economy before they are confident enough to spend their cash bonus at the shops this Christmas.”