Retailers have welcomed the Reserve Bank’s decision to cut interest rates by a further 25 basis points down to 3.25 per cent.

The new executive director of the National Retail Association (NRA) Trevor Evans said the decision by the RBA will provide retailers some much needed breathing space.

“The Reserve Bank has recognised that trading conditions remain poor and many retailers are struggling as they approach the most important trading period of the year,” he said.

“The Christmas and New Year sales will be critical for retailers, as traditionally up to 25 per cent of their yearly earnings is made around this time.

“That spending creates a financial buffer for retailers, which allows them to continue employing their staff throughout the quieter parts of the year.

Similarly, Margy Osmond, Australian National Retailers Association (ANRA) CEO, commended the RBA on its decision with belief this will assist retailers during the most important time of retailing – the Christmas period.

“Retailers will be pleased the Reserve Bank of Australia has moved the cash rate down today, which may give consumers enough time to digest the change in preparation for a good spending cycle in the vital Christmas spending period,” she said.

The decision comes after the RBA recognised key commodity prices for Australia remain significantly lower than earlier in the year, even though some have regained some ground in recent weeks.

“The terms of trade have declined by over 10 per cent since the peak last year and will probably decline further, though they are likely to remain historically high,” Glenn Stevens, RBA governor, said in a statement.

Also, the RBA noted the introduction of the carbon price is affecting consumer prices in the current quarter, and this will continue over the next couple of quarters.

Now, the pressure falls on the banks to pass on the 25 point cut in full to consumers.

“This decision is a lifeline to struggling parts of the economy, but it can only work if it is passed through,” Evans said.

“Any decision by the banks to retain some, or all, of this cut would be counter-productive, as it would result in lower levels of economic activity.

“If spending is reduced and jobs are lost because the full cut is not passed on, everyone loses – including the banks.”