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The Reserve Bank of Australia’s decision to hold the cash rate at 3.6 per cent this week could suppress spending in the lead up to Christmas 2025. 

The Australian Retailers Association (ARA) and National Retail Association (NRA) claim a pre-Christmas rate cut would bolster consumer confidence and encourage much-needed discretionary spending across the peak season sales period.

This comes as ANZ-Roy Morgan consumer confidence remains relatively subdued at 86.3, just below the 2025 weekly average of 86.8.

“A rate cut today would have given a great boost for retailers across the nation in the lead up to peak season,” ARA CEO Chris Rodwell said.

“While spending has started to lift, we are not yet at the level where retailers feel assured of a clear shift in the cycle. Many discretionary retailers make up to two thirds of their profits during peak season and use this important period to replenish cash reserves.”

According to the RBA, there have been recent signs that private demand is recovering faster than public demand. This means households and businesses are buying up stronger than government and foreign buyers. 

The RBA also noted that inflation may be persistent in some areas, while the labour market conditions overall remain stable, with all these factors leading the board to remain cautious and hold the cash rate. 

“There are uncertainties about the outlook for domestic economic activity and inflation stemming from both domestic and international developments,” the RBA noted. “On the domestic side, stronger-than-expected data on growth and inflation may indicate that households have become more comfortable consuming as real incomes and wealth rise. 

“If this continues, it may make it easier for businesses to pass on cost increases and lead to more demand for labour. Alternatively, the recent growth in consumption might not persist, particularly if households become more concerned about overseas developments.”

Rodwell said the past couple of years have been challenging, particularly for small business, with the retail sector only just starting to experience better trading conditions in recent months. He said retailers are holding out hope for further interest rate cuts. 

“Retailers are also facing continued cost pressures from spiking rents, wage growth, higher energy, insurance, and supply chain challenges – alongside an intensifying wave of retail crime,” Rodwell added.

“Global competition is significant, with ultra-low-cost digital retailers capturing a sizeable share of local spending without the same obligations as domestic businesses. On top of this, continued regulatory reform and workplace changes are stretching small businesses beyond their capacity.”

All these factors add to why Rodwell and his team have been advocating for action around retail crime and ramping up an agenda on productivity and red-tape reduction. 

“Removing barriers will strengthen local retailers, who contribute nearly one fifth of Australia’s GDP, and give them the confidence to invest in their businesses,” he said.

“With one-in-ten Australians employed in retail, our $430 billion sector is crucial to the national economy. A stronger economic trajectory can’t happen without a retail recovery. To encourage sector recovery, we’re keen to see a rate cut this side of Christmas.”

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