RETAIL BODY SLAMS RATE RISE
Written on the 11 March 2010
THE Australian Retailers Association (ARA) has slammed the Reserve Bank of Australia’s (RBA) 25 basis points rate rise today, saying it will hurt the struggling retail sector.
ARA executive director Russell Zimmerman, says Queensland recorded dismal January retail trade figures of 0.7 per cent, which is below an already low national average of 1.2 per cent.
“We’re asking the RBA to please be cautious on further rate rises – if they go up a bit when the economy is running rampant then I think that’s deserved, but at the moment I don’t think that it is,” says Zimmerman.
“We’re totally disappointed – there are signs out there that we still haven’t recovered, as we had three consecutive rate rises last year and I don’t think that’s really kicked in yet.
“It takes money out of the economy but people are not actually spending freely by any stretch of the imagination.”
Suncorp Bank executive general manager Tim Buckett, says while the rate rise to 4 per cent was unsurprising, he says a rise to 5 per cent is possible in the next 12 months.
“Rates are still at historical lows and the RBA aims for a 4 per cent to 5 per cent average – all indicators are pointing towards high business growth, people are employing again and housing is rising at the fastest rate in five years,” says Buckett.
“It’s not surprising, but I think it probably would have been if they didn’t because the RBA has been talking up the strength of Australia for some months now.
“It might be hard to say, but it’s better for the long term that we don’t let things get out of control in the growth cycle.”
He says the context of the situation is important, considering 18 months ago rates peaked at 7.5 per cent.
“It’s not a drastic change. If you look at a $300,000 loan that will cost the borrower another $40 to $50 a month,” he says.
“This probably won’t be the last increase in the cycle, so borrowers need to plan that into their budgets for the next 12 months.
PRDnationwide managing director Jim Midgley, supported the Reserve Bank’s decision.
“The RBA is still handling money policy correctly,” he says.
“There are enough signs in the current market that property is performing well. The intention of keeping inflation down is a good move.”
The property chief said he did not expect today’s hike to affect the property market.
“We are not going to see a great slowing. The dynamics of the property market still look very strong,” he says.
“Australian home owners could start to feel financial pain when the cash rate starts to climb over 5 per cent, but until then, don’t expect activity to decrease in the market any time soon.”