The Reserve Bank of Australia has increased interest rates by 25 basis points to 4.6%, its highest level in 15 years and the fourth increase this year.
The Australian Retail Council (ARC) has warned another interest rate rise will further squeeze household budgets and compound the rising freight and supply-chain costs already confronting retailers as higher fuel prices flow through the economy ahead of the peak trading season.
ARC Chief Economist Glenn Fahey says the latest increase couldn’t come at a worse time for retailers and households.
“The Reserve Bank has a difficult job and there’s no question inflation remains too high. However, a fourth interest rate rise this year comes as households and businesses are already confronting significantly higher petrol and diesel prices,” he says.
Higher supply chain costs have been weighing on retailers for much of the year, notes the ARC. The latest ABS figures show road freight transport prices surged 15.5% in the June quarter, the largest quarterly increase since the series began in 1997, driven by higher fuel surcharges.
“Households are now facing higher costs at the bowser and in their mortgage repayments. At the same time, retailers are paying more for finance, freight and deliveries as increased fuel costs flow through supply chains,” says Mr Fahey.
“Retail spending has remained resilient, but there’s a point where it becomes fragile. The combination of another rate rise and sharply higher fuel costs risks taking momentum out of consumer spending just as retailers enter the most important trading period of the year.”
Mr Fahey says retailers are also facing continued pressure across wages, energy, insurance, leasing and compliance.
“Consumers are shopping carefully, waiting for promotions and looking closely at value. Retailers can’t pass all of their increased costs on especially in peak sales periods, so many are absorbing them through tighter margins,” he says.
“Many discretionary retailers rely heavily on Black Friday and Christmas to rebuild cash reserves, making the timing of this rate rise seriously difficult.”
The pressure is showing up in retail insolvency numbers, too. The latest provisional ASIC figures show 1006 retail companies entered external administration or had a controller appointed in 2025–26, up 15.5% from 871 the previous financial year. It’s also more than triple the amount in 2021–22 and an increase of 215% in four years.
“The government must recognise how difficult the business operating environment has become and focus on lifting productivity, reducing the cost of doing business and cutting red tape,” says Mr Fahey.
