Retailers can breathe a sigh of relief after The Reserve Bank of Australia left the cash rate on hold at a 12-year high of 4.35 per cent, any higher and retailers were facing further declines in sales as consumers with mortgages cut back on spending.
Some economists were tipping a rise after inflation came in higher than-expected in the March quarter and the unemployment rate fell to near 50-year lows, prompting bond traders to price in a 44 per cent chance of another rate increase from the central bank this time round.
Most economists still expect the next move will be a rate cut by the end of the year or early 2025.
The central bank has lifted interest rates 13 times since 2022 in an effort o to bring inflation under control.
One contributor to the pain for consumers is the amount of money that the Labor Federal Government are forcing businesses to invest with increased salaries and costs that are hurting retailers and suppliers.
RBA governor Michele Bullock will hold a media conference at 3.30pm and may provide more insights into the board’s decision-making. It has been six weeks since the central bank last commented on monetary policy.
Australia’s peak retail body, the Australian Retailers Association (ARA), welcomed the decision following recent subdued retail trade data.
ARA CEO Paul Zahra said today’s rate decision will provide a hint of relief for retailers as economic challenges continue to dampen discretionary spending and consumer confidence.
“At a time of immense financial pressure and hardship for many Australians and retail businesses – avoiding another cash rate increase is critical to consumer confidence.
“March’s retail performance remained subdued, with cost-of-living pressures taking their toll on discretionary spending categories.
“Higher interest rates are a major factor in this spending slowdown. Whilst we haven’t seen an increase since November, higher mortgage repayments are taking a toll on household budgets.”
With May’s cash rate decision now in the books, the RBA will meet again mid-June.
“Retailers were initially optimistic for a cash rate cut in mid-2024 – which now appears less likely,” he said.
“Another cash rate increase would be punishing for both mortgage holders and discretionary retailers, with small businesses on thin margins being the most vulnerable.”
