National Retail Association’s chief Greg Griffin has warned that yesterday’s surprise rate rise will further stretch Australian retailers.
Consumer confidence is experiencing a low stretch not seen since the 1990-91 recession, and this extra interest rate hike will hit retailers the hardest.
“The RBA’s own research shows current inflation is driven by supply issues, which is now easing, but interest rate hikes only work to slow demand,” Griffin said.
“With our tight labour market, consumer spending is maintaining a level of consistency that prolongs the impact of inflation.
“This complex trade-off between economic activity and slowing inflation means retailers are being stretched in different directions, and it’s time to take a different approach.”
Morgans Financial chief economist, Michael Knox, believes the cash rate will hit 4.85 per cent by the end of the year, one full percentage point higher than the current rate.
“Although it is true that goods inflation is slowing, it is also the case that
services inflation is accelerating,” Knox says.
“As Australian wages rise more rapidly in response to rising inflation, this makes it increasingly difficult for the RBA to squeeze inflation out of the Australian economy. The only way the RBA can do this successfully is by continuing to increase rates.
“The RBA will have to continue to be vigilant in its task to return inflation to the 2-3 per cent target. That task will not be achieved for some time.”
