The cash rate will continue to sit at 2.75 per cent after the Reserve Bank decided to leave it unchanged.
RBA governor Glenn Stevens said easier financial conditions that are in place will contribute to a strengthening of growth over time, consistent with achieving the inflation target.
“Inflation has been consistent with the medium-term target and is expected to remain so over the next one to two years, notwithstanding the effects of the recent depreciation of the exchange rate,” he said.
“The easing in monetary policy over the past 18 months has supported interest-sensitive spending and asset values and further effects can be expected over time. The pace of borrowing has remained relatively subdued, though recently there are signs of increased demand for finance by households.
“The Australian dollar has depreciated by around 10 per cent since early April, although it remains at a high level. It is possible that the exchange rate will depreciate further over time, which would help to foster a rebalancing of growth in the economy.”
This decision has left many retailers frustrated as they continue to face excessive rises in business costs.
Australian Retailers Association (ARA) executive director Russell Zimmerman said May’s lowered rates have not been enough help for retailers who need relief from consumers’ reluctance to spend.
“This frustrating rate stay, together with higher operational costs and recent increases to the minimum wage, superannuation levy and penalty rates, means we can only expect further damage to retailers who are struggling to keep their heads above water,” he said.
“To address a compromised economic situation, the RBA needs to cut official rates to 2.5 per cent to get variable mortgage rates to a level of 6 per cent.”
Similarly, Australian National Retailers Association (ANRA) CEO Margy Osmond said a cut is necessary to calm mounting uneasiness felt by consumers in the lead up to the federal election.
“With an election date still to be announced, we’re concerned about the impact this might have on consumer spending and would encourage the Board of the Reserve Bank of Australia to consider the impact this might have on the sector as we look ahead to the Christmas period,” she said.
“Although the weaker Australian dollar has provided some relief to the trade-exposed sectors of the economy and lowered the attractiveness of spending overseas, we expect consumers to remain cautious about their discretionary spending in Australia as we enter the second half of the year.”