While retailers have been urging the Reserve Bank to drop the cash rate further to help ease increasing pressures, the Board has decided to leave it unchanged at 2.75 per cent.

Reserve Bank governor Glenn Stevens said there have been signs that easier financial conditions are now in place and will help contribute to a strengthening of growth over time.

He pointed out growth in Australia over the past year has been a bit below trend and the outlook is similar in the near term. The unemployment rate has edged higher over the past year and growth in labour costs has moderated. Inflation has been consistent with the medium-term target and is expected to remain so over the next one to two years.

The exchange rate has also depreciated since the previous Board meeting, although, as the Board has noted for some time, it remains high considering the decline in export prices that has taken place over the past year and a half.

“It decided that the stance of monetary policy remained appropriate for the time being. The Board also judged that the inflation outlook, as currently assessed, may provide some scope for further easing, should that be required to support demand,” Stevens said.

However, National Retail Association (NRA) CEO Trevor Evans said he is disappointed in at the Reserve Bank’s decision to hold the cash rate as both consumers and retailers are waiting for a second round of expected cuts.

“We saw some initial signs of improvement in the retail sector early in the year, but since then confidence has been de-railed by the early announcement of the election campaign, some pessimistic forecasts for jobs and mining investment, and the recent budget deficit,” he said.

“It will require a second cut this year in order to lock in some consumer confidence and growth.

“Ideally we’d have liked to see that second cut today, but we now urge the bank to move again on rates when it meets next month.”