Analysts are now tipping that the Albanese Labor Government could go on a mammoth spending spree in an effort to hold onto power with an election possibly called this weekend, the move could push up inflation claim observers.
Earlier today the Reserve Bank Of Australia cut interest rates by a quarter percentage point, which enhances Anthony Albanese’s bid to retain Labor seats where consumers have been hardest hit by Labors environmental and economic policies.
So desperate for a cut the Labor party had unionists from the Trade Union movement, lobbying outside the RBA offices in Martin Place Sydney ahead of the cut, a move that was more about politics than the lowering of costs for consumers, with union demands for more pay contributing to a spike in spending by those who got above inflation pay rises.
Retailers such as JB Hi Fi CEO Terry Smart are concerned that during an election period consumers tend to not spend as much and this could impact spending.
As soon as the cut was announced retailers the Australian Retail Association said that while there will be an initial confidence boost tough times are far from over for the sector.
Both the Australian Retailers Association and the National Retail Association said subdued consumer spending and high costs of doing business have rocked the sector and a retail recovery is long overdue.
“The Reserve Bank’s decision to cut the cash rate to 4.10% is a step in the right direction. This should provide modest relief to households, helping restore spending confidence and set a more optimistic tone for 2025,” said ARA Chief Industry Affairs Officer, Fleur Brown.
“While a lower cash rate will help ease some of the strain on businesses and consumers, we need to see this momentum continue. Retail represents almost one fifth of our gross domestic product – we can’t have an economic recovery without a retail recovery. However, with the past year of retail performance tracking well below five-year trends we need to see continued focus on restoring confidence.
Ms Brown also noted the flow-on impact of any interest rate changes to retail is likely to have a lag effect.
NRA Interim CEO Lindsay Carroll said the cash-rate offers a much-needed boost to retail and consumer sentiment, but a lot more work needs to be done.
“The rate cut is a great start, but with a Federal Budget and election around the corner, retailers are looking for signals around sustainable economic growth,” Ms Carroll said.
“For our $430 billion retail sector to thrive, we need to see focused policy making around areas such as combatting retail crime, strengthening supply chain resilience, and bolstering small business support.
“Retailers, especially small businesses, are vital to the economy and contribute to job creation in local communities across Australia. The success of businesses in a community reflects the community’s overall well-being.
“As the nation’s largest private sector employer, it’s vital that retailers—both small and large—are given the confidence to continue investing in their businesses through the critical months ahead,” she said.
A small number of analysts, however, expected the RBA to hold fire, anticipating the central bank would remain wary of elevated services inflation.
For much of the past three years, Ms Bullock and her predecessor, Phil Lowe, have maintained a sharp focus on preventing stubborn inflation from becoming entrenched, leading the RBA’s most aggressive tightening cycles in decades by raising interest rates 13 times.
Back in December 2022 inflation soared to 7.8 per crimping household budgets and hitting retail sales.
Price growth has moderated considerably since then, slowing to 3.2 per cent in underlying terms at the end of 2024.
That decline comes despite remarkable strength in the jobs market, which appears to be tightening again despite weak economic growth.
The Australian claims that the unemployment rate stood at just 4 per cent in December, as booming government-aligned hiring helped offset weakness in the private sector.
While central banks across the world began to cautiously cut interest rates last year, the RBA has instead opted to stay on the sidelines, wary of easing monetary policy before inflation is fully contained and thereby sparking another wave of price pressures
