The interest rate cut announced Tuesday by the Reserve Bank is a modest but necessary step to sustain economic growth, according to the Australian National Retailers Association (ANRA).

“While retailers would have preferred a deeper cut of 0.5 per cent, an interest rate cut is essential to maintaining the momentum of monetary and fiscal policy,” said ANRA CEO Margy Osmond.

Osmond said the conditions are right for an interest rate cut. Inflation is cooling and unemployment is rising. Growth forecasts for Australia and our trading partners are again being revised downwards.

“The prospect of lower interest rates gives families mortgage relief at a time when many are concerned about their job. Without falling interest rates, consumer confidence would be far worse.

“We urge the banks to pass on the entire interest rate cut to their customers.

“Retailers expect the government’s second stimulus package to support activity in the sector over the next four months. ANRA estimates that about $2.4 billion is likely to be injected into the sector, which will help protect jobs,” said Osmond.

Despite the two stimulus packages, and lower interest rates, the retail sector still faces a lean 2009. Access Economics forecasts that retail sales (in real terms) will grow by 0.8 per cent in 2008-09 and 0.2 per cent in 2009-10.