Did retailers celebrate too earlier? Maybe. Or so that’s what many have said following the Reserve Bank’s decision to leave the cash rate unchanged at 2.5 per cent.
Reserve Bank governor Glenn Stevens said while the economy has been growing it’s still too early to tell whether this will remain stable going forward.
“There has been an improvement in indicators of household and business sentiment recently, but it is still too soon to judge how persistent this will be. Public spending is forecast to be quite weak,” he said.
“Recent data on prices show inflation consistent with the medium-term target. The Bank's assessment is that this is likely to remain the case over the next one to two years.
“The easing in monetary policy that has already occurred since late 2011 has supported interest-sensitive spending and asset values. The full effects of these decisions are still coming through, and will be for a while yet.
“The pace of borrowing has remained relatively subdued overall to date, though recently there have been signs of increased demand for finance by households. There is also continuing evidence of a shift in savers' behaviour in response to declining returns on low-risk assets.”
However, retailers have expressed their disappointment in the Reserve Bank as it gives little encouragement to consumers to spend this Christmas, said ARA executive director Russell Zimmerman.
“Retailers are counting on the lead up to Christmas as an opportunity to catch up on past slower retail sales and get back on track financially. We hope to see retailers and consumers alike enjoying a heightened sense of confidence as we enter the festive season and increase their discretionary spending,” he said.
“We understand that the Board will continue to assess the outlook and adjust policy as needed, but this needs to be made a priority. The ARA believes that the current cash rate of 2.5 per cent has room for further adjustment.
Similarly, Australian National Retailers Association (ANRA) CEO Margy Osmond expressed her concerns believing there is still scope for another cut.
“With now just 50 sleeps until the man in the big red suit arrives and with no sign the RBA will provide a further boost to family budgets delivered in the form of a rate cut, the sector will have to work very hard to encourage shoppers to whip out their wallet and splurge this Christmas,” she said.
On the other hand National Retail Association (NRA) CEO Trevor Evans believes the Reserve Bank’s decision will give consumers and business owners stability and certainty.
“We have seen the very welcome beginning of a possible recovery in consumer spending and retail growth over the last two sets of monthly data,” Evans said.
“This, along with growth in other sectors such as real estate, has prompted some speculation that the bank may move to increase rates to limit inflation in the economy.
“However, reports from our members suggest that this growth may not have continued as strongly throughout October.
“Retailers now have their focus firmly on the Christmas trading period, and they will be hoping for a strong result to help make up some of the ground that has been lost in recent years of disappointing retail trade results.
“An interest rate increase at this delicate point would shatter that fledgling confidence, and throw serious doubt over the vital pre-Christmas trading period.”