Retailers will feel the brunt of the third successive interest rate rise as consumers will be spending less this Christmas.
The Australian Retailers Association (ARA) executive director Russell Zimmerman said the Reserve Bank of Australia’s (RBA) aggressive monetary policy was taking more cash away from Australian mortgage holders by lifting rates by 0.25 points making the cash rate 3.75 per cent.
"The 2009 ARA Christmas Retail Expectations Survey revealed 56 per cent of retailers believed the past two interest rate cuts would decrease sales over the festive season. With the extra rise today these statistics may now rise and cause even greater impact to sales," said Zimmerman.
"In fact, around $140 will be added to monthly repayments on an average $300,000 mortgage as a result of the last three rate affecting Christmas spending for those working within budget constraints."
This all has a direct and real impact on retailers looking to give their businesses a boost after a very trying year of patchy sales. Retailers are one of Australia’s largest employers and for further economic recovery they must have incentive to hold onto staff. Not only do retailers have increased wage bills as a result of the modern retail award to cope with in 2010, but now the RBA is hitting them from the other side by taking cash away from consumers who are still worried about their jobs.
"Instead of letting retail recovery gain some much needed momentum over the Christmas and Post-Christmas trading period, the RBA is taking cash away from consumers at the worst possible time,” said Zimmerman.
According to Australian National Retailers Association (ANRA) CEO Margy Osmond, this is the first time in six years the Reserve Bank has lifted rates just before Christmas.
“This is the first time the RBA has lifted rates three months in a row, and it risks choking off higher retail spending during the most important trading period in the year,” she said.
“It’s disappointing the Reserve Bank didn’t wait until after the crucial Christmas period before deciding to raise rates again.”
Retail sales have been up and down ever since the cash handouts faded out earlier this year. Retail sales were down 0.2 per cent in September, up 0.9 per cent in August, down 0.9 per cent in July, down 0.8 per cent in June.