The Australian Retailers Association (ARA) said the expected interest rate cut of 1.0 percentage point will take three to six months to flow through the economy and is calling on the Federal Government to adopt a range of stimulus measures to accelerate consumer spend.
ARA executive director Richard Evans said the retail market was still suffering from the Reserve Bank of Australia (RBA)’s decision to increase cash rates in February/March last year, but another interest rate cut this week indicates our leading financial regulators are now listening to retailers hard hit by months of reduced consumer demand.
“Retailers are beginning to see the benefits of rate cuts from September to December last year but no significant benefit will be felt until March/April.
“Retailers will welcome a further interest rate cut … for families with mortgages but there won’t be an immediate impact. We now urgently require a range of alternative stimulus measures to provide consumer confidence and to inject consumer funds back into the economy, including incentives for new credit card products with lower interest rates for business and consumers; personal income tax relief across the board, and targeted consumer stimulus package (reimbursement upon receipt of approved payment).
Evans said that while the RBA is doing its job by cutting interest rates, the Rudd Government needs to look closely at measures to further stimulate spending and assist – not just home owners – but renters who have mounting credit card debt, as well as small business owners who use credit to fund their cash flows.
“We now see improved growth to return by September 2009, but the rest of the economy lags three to six months behind the retail sector cycle. This means there may not be good news for other industries until December 2009/January 2010.
“Retailing is the barometer of the economy and although there are signs of emerging consumer confidence the sector needs more stimuli to drive cash and thus save jobs,” said Evans.