Fourth rate rise will impact retail growth

Published on Fri, 29/01/2010, 10:11:53

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A fourth consecutive RBA rate rise will have a significant impact on growth for retailers, who are still dealing with last year’s three rate rises.
 
The Australian Retailers Association (ARA) executive director Russell Zimmerman said the possible interest rate rise is badly timed and fails to acknowledge February as the toughest month for consumers and retailers – particularly as continuous interest rate rises in October (.25), November (.25) and December (.25) last year are still impacting the retail sector.
 
“The impact of last year's interest rate rises will still be flowing through to the retail sector until at least March,” he said.
 
"As well as dealing with last year's interest rate hikes, families will be experiencing traditional February financial strain of credit card bills from the festive season and back to school costs. The RBA must allow consumers time to recoup some expenses before implementing yet another rate rise,” said Zimmerman.
 
"Retailers will be hit doubly hard from a February rate rise as they juggle staff numbers to cope with increased wage bills in compliance of the recently implemented modern retail award.”
 
The National Retail Association (NRA)’s executive director, Gary Black said that any RBA determination about further interest rate rises should not be made until the bank has fully considered the implications of the December Retail trade data, which will not be available until 4 February.
 
“If this means that in order to fully inform itself on the state of the economy or of the retail sector the Reserve Bank has to wait for its March meeting to decide on the level of interest rates, than this is the most appropriate course of action given that December retail trade data is of exceptional significance to the industry in that it represents, for many retailers, more than 20 per cent of total annual turnover.”
 
Such a decision is also sensible because February is the weakest trading month of the year for most retailers and a further rate rise at the start of February will further depress trading conditions impacting negatively on retailer profitability and employment.
 
ABS Retail Sales data (original) shows that February sales do not represent much more than seven per cent of total annual turnover:


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