RBA’S STEADY HAND APPLAUDED
Written on the 4 March 2011
THE Reserve Bank of Australia’s (RBA) decision to hold rates showed a steady hand as consumers cut spending and deal with an increased cost of living, according to the retail industry body.
Following the decision to hold rates this quarter, the Australian Retailers Association is urging the RBA to keep interest rates fixed until at least the third quarter.
Executive director Russell Zimmerman says sluggish January retail figures showed a year-on-year decline for key sectors including department stores, household goods and apparel retailers.
“(The) interest rate hold was the right decision to ensure retailers are not put under further pressure as frugal consumer behaviour continues to produce poor trading conditions,” says Zimmerman.
“Retail year-on-year growth is well below the current rate of inflation at 1.8 percent and retailers aren’t expecting any significant boosts in the coming months.
“While increases to utilities, essential foods and other living costs continue to rise, consumer discretionary spend tightens. Add to this signs of a new flood levy and carbon tax on the horizon and you’ve got a recipe for disaster for retailers who are desperately trying to get consumers back in the door.
“Retailers are calling on the RBA to continue their steady hand and keep rates on hold until at least the third quarter while both consumers and retailers get back on their feet.”
Zimmerman says recent studies indicate 50 percent of frugal consumers plan on spending less in 2011, largely due to anticipated flood levies.