By Aimee Chanthadavong

The Reserve Bank of Australia (RBA) has decided to raise the cash rate by 0.25 per cent to 4.75 per cent.

Glenn Stevens, RBA Governor said in a statement that the decision was “prudent” because the growth of the global economy grew faster than trends over the year to mid-2010.

Speaking to Retailbiz, Russell Zimmerman, Australian Retailers Association (ARA) executive director said the RBA should not have increased interest rates prior to Christmas, a period that is expected to be crucial time for retailers this year.

“Retailers were badly affected last year because of a number of rate rises that occurred just before Christmas and this year, we called for the RBA to not increase interest rates this Christmas period but they have,” he said.

Following the RBA’s decision, Commonwealth Bank has lifted its interest rates by almost double (0.45 per cent) the RBA’s percentage point from 7.36 per cent to 7.81 per cent.

“The rate rise meant that Commonwealth bank has put on almost double what the rate rise was and that is a concern and we implore that other banks do not do the same thing,” Zimmerman said.

“Going into Christmas where a majority of retailers see 40 per cent of their customers come through their doors, this rate rise will slow trading down. There’s no joy in Christmas now because the RBA believes the economy was moving too quickly but they obviously haven’t looked at other parts of the economy and retailing is one of those.”