The Reserve Bank of Australia has voted to leave the cash rate at 3.6 per cent, with retailers turning their attention to the Government for help.
In its statement, the RBA shared that while inflation has fallen substantially since its peak in 2022, it has picked up again more recently. The RBA board’s judgment is that some of the recent increase in underlying inflation was due to “temporary factors”, but added there is uncertainty about how much signal to take from the monthly CPI data, given it is a new data series.
“Nevertheless, the data do suggest some signs of a more broadly based pick-up in inflation, part of which may be persistent and will bear close monitoring,” the RBA noted.
The RBA then went to on to note that economic activity continues to recover, alongside growth in private demand, driven by both consumption and investment. Various indicators also suggest that the labour market remains a little tight, with wage growth easing.
“There are uncertainties about the outlook for domestic economic activity and inflation and the extent to which monetary policy remains restrictive,” the RBA concluded. “On the domestic side, the pick-up in momentum has been stronger than anticipated, particularly in the private sector.
“If this continues, it is likely to add to capacity pressures. Uncertainty in the global economy remains significant, but so far, there has been minimal impact on overall growth and trade in Australia’s major trading partners.”
Retailers were banking on a cut ahead of Christmas to help spur spending, but instead of lashing out at the RBA, the Australian Retailers Association (ARA) and the National Retail Association (NRA) have reached out to governments across Australia for hope.
ARA CEO Chris Rodwell said a key focus area should be addressing regulatory fragmentation across the states.
“Australia is facing its worst productivity growth in more than 60 years,” Rodwell said. “We need governments to act to reduce the regulatory burden and lift productivity.
“A significant aspect of this work has to be for the Federal Government to work with the States to reduce regulatory fragmentation. Without this effort, interest rates will remain higher for longer – and the entire economy will feel the strain.”
Rodwell continued, saying consumer and business confidence remains fragile, and that the outlook on interest rates is creating great uncertainty around what 2026 looks like for businesses and households.
ANZ-Roy Morgan consumer confidence still remains below the base level of 100, now sitting at 83.5 in the first full week of December. This is 2 points lower than a year ago and 0.9 points below the 2025 weekly average of 86.4.
Business confidence is also challenged, with Roy Morgan data showing it has dropped 3 points to 98.7, wiping out the gains made during September and October. Retail is in the five least confident industries, at 91.1, just ahead of construction (89.1), agriculture, forestry and fishing (79.3) and wholesale (77.3).
“After years of subdued spending, coupled with rising costs of doing business, we need to more to strengthen our $444 billion retail sector,” Rodwell said. “Retail is the largest private sector employer in the nation – contributing almost one fifth of Australia’s GDP. We need retail to thrive, which will have a flow-on effect to everyone in Australia.”
The ARA cited a recent report commissioned by the Australian Institute of Company Directors and prepared by Mandala, which shows that Australia now has the second-highest regulatory burden among G7 nations, behind Japan.
The report also shows that the number of Acts and legislative instruments has more than doubled from 3,974 in 2000 to 9,600 in 2024. Total pages of laws and instruments have tripled since 2000 – from 67,000 to 193,000.
Rodwell said this “avalanche” of regulation has created a “fragmented, overlapping and confusing system that is impossible for businesses to navigate efficiently”
“This leaves many small to medium-sized businesses particularly vulnerable,” Rodwell said. “The compliance load is clearly suppressing investment, productivity and innovation — all of which are essential for easing inflation and lowering interest rates.”
Rodwell said the Federal Government needs to work fast with its economic reform agenda — including streamlining regulation, lifting workforce participation and capability and supporting business investment.
“Today’s rate decision is a reminder that monetary policy can only do so much,” Rodwell said. “If we want lower interest rates, stronger growth and better living standards, the productivity agenda must accelerate – starting now.”