The Reserve Bank of Australia (RBA) has left the interest rate unchanged at three per cent today and foresees no other rate cut until after the June quarter inflation numbers are released in July.
The Australian Retailers Association (ARA) executive director Richard Evans said today’s interest rate hold indicated the RBA was waiting to evaluate the effects of other economic stimuli yet to impact the market.
“With the federal budget announcement next week and while there are still a number of economic influences at play, the RBA is keeping its powder dry by not exhausting the ability to provide further rate cuts in the coming months,” he said.
There is a lot of good news for the economy at the moment, including the government stimulus package currently being rolled out, and other interest rate cuts from late last year and early this year typically taking three to six months to flow to the retail sector.
“Retailers are working hard at the moment to stimulate consumer spend and ensure the government’s stimulus funds, currently landing in bank accounts, are injected back into the economy.”
Although March retail trade figures are out tomorrow, early indications point towards an improvement on February’s low growth, but retailers aren’t expected to feel the full effects of the stimulus package until July, said Evans.
“The six successive rate cuts since September last year have reduced the official cash rate by 425 basis points saving home owners (with an average $350,000 standard variable mortgage) between $700 and $950 per month.
“Many home owners are choosing to reduce their debt by paying off their mortgage at a faster rate. What we’re saying to consumers is, by all means use some of this extra cash to reduce your debt but also spend some to inject funds back into the economy and help save jobs,” said Evans.