Retail bodies have welcomed the Reserve Bank of Australia (RBA) decision to drop the official cash rate by a quarter of a per cent to a historic low of 1.75 per cent.
ARA Executive Director Russell Zimmerman says that with slower retail sales this year than 12 months ago and a federal election on the horizon, consumer confidence has taken a hit, as is typically the case prior to an election.
“We look forward to this cut filtering through to consumers and business,” he said.
The National Retail Association Industry Research and Data Analyst Cameron Meiklejohn said a lower cash rate will generate more momentum in the retail sector.
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“We have seen reasonably flat consumer confidence across the past six months, and below-average growth in retail sales, so we certainly hope that the cut in interest rates will have the desired effect of improved borrowing and spending across the economy,” he said.
“Consumer confidence has been tested in recent months with volatility in international financial markets, a decline in the Australian share market, and a cooling in the residential property market all contributing to greater caution in consumer spending.
“It is hoped that this decision will ease some of this caution and concern, and generate greater momentum across the economy. When retail is flourishing, it drives productivity and jobs growth right across the country.”
Announcing the rate drop on Tuesday, Governor of Monetary Policy Decision Glenn Stevens said the decision followed information showing inflationary pressures are lower than expected.
“In Australia, the available information suggests that the economy is continuing to rebalance following the mining investment boom,” he said. “GDP growth picked up over 2015, particularly in the second half of the year, and the labour market improved. Indications are that growth is continuing in 2016, though probably at a more moderate pace.”
The board judged that prospects for sustainable growth in the economy, with inflation returning to target over time, would be improved by easing monetary policy.