As expected by many retailers, the Reserve Bank has decided to leave the cash rate unchanged at 2.5 per cent.
RBA governor Glenn Stevens said while there have been signs of spending due to a number of interest rate cuts in the past, there is still room for more to happen.
“The easing in monetary policy since late 2011 has supported interest-sensitive spending and asset values, and further effects can be expected over time, including from the declines in rates seen over recent months,” he said.
“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 15 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.”
Stevens also said the Board will continue to assess the outlook and adjust the cash rate as needed.
This has left retailers feeling reassured there’ll be more room for further rate reductions going forward.
“Winter has been a tough time for the retail sector, and when the RBA decided to lower interest rates last month, retailers were optimistic that the interest rate cut may encourage consumers to let go of their purse strings somewhat – especially as we enter the warmer spring and summer months and the lead up to the Christmas period,” ARA Executive Director Russell Zimmerman said.