The Reserve Bank (RBA)’s decision to leave the cash rate unchanged at 3.25 per cent signalled Australia’s economic conditions were stabilising.

The Australian Retailers Association (ARA)’s executive director Richard Evans said the RBA’s positive indication of economic recovery was confirmed by January retail trade growth of 0.2 per cent, reflecting a year-on-year growth of approximately 6.5 per cent.

“Seasonally adjusted retail trade growth for January… showed signs of consumers returning from financial hibernation and responding to positive economic influences, including the lowest interest rates since the 1960s and the Federal Government’s first stimulus package in late December,” said Evans.

Australian National Retailers Association (ANRA) CEO Margy Osmond said that “there was some concern that after December, retail sales would fall away, but this positive result for January shows the growth has been sustained which is great news.

“Access Economics analysis prepared for ANRA estimates that the combination of the stimulus package and interest rate cuts has boosted retail spending by about $1.3 billion over December and January.

“If the Federal Government and Reserve Bank hadn’t intervened with aggressive monetary and fiscal policy stimulus, we’d be looking at a completely different set of numbers. Equally, if retailers hadn’t extended their sale periods or used heavy discounting to attract shoppers, the results wouldn’t be so positive,” said Osmond.

Evans said there is more good news on the way for consumers with the Federal Government’s second stimulus package planned to hit bank accounts from March, but the mitigating factor for economic recovery is employment.

“Retailers including Woolworths, Bakers Delight and Aldi have announced significant job creation over the next year but we’re urging employers right through the supply channels to hold onto their staff who have the key to economic recovery in their pockets,” he said.

If unemployment levels remain at approximately five per cent, the retail sector should see improved growth return by the September 2009 quarter, but the rest of the economy lags three to six months behind the retail cycle. This means there may not be good news for other industries until December 2009/January 2010.

“The flow through effect of the interest rate cuts and the second stimulus package will be vital in maintaining confidence in the retail sector and giving Australia’s largest employers the prospect of increasing sales in 2009,” said Osmond.