It's a huge sigh of relief for Australian retailers – but do they need to proceed with caution?
The Reserve Bank of Australia (RBA) has announced its decision to cut interested rates by 25 points to a low of 2 per cent.
The Australian Retailers Association (ARA) executive director Russell Zimmerman has welcomed the decision and said it will help instil confidence in Australian businesses to grow.
Zimmerman also believes that it is a small stepping stone in pushing for bigger systemic changes in the retail sector.
"While a reduction in rates is always welcomed, this alone is not enough to stimulate business and jobs growth. Retailers are now looking ahead to the Federal Budget to ensure small business tax cuts are being delivered in order to boost their bottom lines."
Zimmerman is now calling for the federal government to take action to assist small business and retailers improve their business.
"Low interest rates are acting to support borrowing and spending and today’s rate cut is certainly a positive step, however, business growth must still be supported with a solid plan in the upcoming Federal Budget."
The National Retail Association (NRA) have welcomed the announcement with caution.
NRA CEO Trevor Evans said while extra cash in consumer's pockets could be good news for Australian retailers, the government's failure to close the GST loophole for online purchases could backfire.
"The fact is that today’s rate cut by the RBA may have the effect of stimulating economies other than Australia’s, if consumers decide to do their extra spending online in order to avoid Australian taxes and charges.
If politicians and policy makers are serious about boosting domestic economic activity, then they should move to close the GST loophole which encourages Australians to shop from overseas businesses.
This would provide an instant boost to local spending, generating higher levels of employment and economic activity."
Evans also believes that strengthening consumer confidence is key to ensuring longevity in the retail sector.
"Consumer confidence is also critical for strong retail sales, and if today’s rate cut raises concerns about the strength and future direction of the economy then we run the risk that some of the benefits could be undone."