Retailers are not happy about the Reserve Bank of Australia’s (RBA) decision to hold the official cash rate at 3.85 per cent.
The Australian Retailers Association (ARA) and National Retail Association (NRA) have called it a blow for consumer and business confidence, and could undercut the recovery of the sector.
“Weak consumer spending and high business costs continue to put pressure on retailers,” ARA CEO Chris Rodwell said.
“With inflation well within target range, today’s RBA decision is a missed opportunity to bolster the outlook of operators around the country. Retail conditions remain subdued by historical standards and relief is sorely needed.”
One-in-ten Australians are employed in retail with the sector worth $430 billion. Rodwell said retailers have been battling higher costs of doing business across the board, including higher rents, wage and superannuation increases, and growing costs in retail crime remediation, as well as higher energy, insurance, supply chain costs.
He added that global competition is also surging in, with ultra-low-cost digital retailers like Temu and Shein scooping up a growing share of local spending, “without being held accountable to the same standards as our local retailers.”
“On top of these challenges, businesses are tied up in regulatory reform, navigating the biggest set of workplace changes in decades. Many small businesses simply don’t have the resources to cope,” Rodwell said.
“That’s why Australia needs to see a bold agenda on productivity and red-tape reduction. It’s vital we remove barriers to business investment and strengthen the resilience of our local retailers, who contribute almost one fifth of our national gross domestic product.
“We stand ready to support the Federal Government with its productivity and economic reform agenda. And we urge the RBA to stay vigilant to opportunities to provide relief in the near term.”
In its monetary decision statement, the RBA board noted that despite inflation falling substantially since its peak in 2022, recent data from the Australian Bureau of Statistics (ABS) didn’t offer enough satisfaction to lower rates for a third time this year.
In the March quarter, headline inflation was at the midpoint of the target range while trimmed mean inflation was at 2.9 per cent. The baseline forecast in May was for underlying inflation to continue to moderate to around the midpoint of the 2 to 3 per cent range with the cash rate assumed to follow a gradual easing path.
“While recent monthly CPI Indicator data suggest that June quarter inflation is likely to be broadly in line with the forecast, they were, at the margin, slightly stronger than expected,” the RBA reported.
“With the cash rate 50 basis points lower than five months ago and wider economic conditions evolving broadly as expected, the board judged that it could wait for a little more information to confirm that inflation remains on track to reach 2.5 per cent on a sustainable basis."
The RBA board added that it remains cautious about the outlook for inflation, particularly thanks to a heightened level of uncertainty about both aggregate demand and supply.
“The board will be attentive to the data and the evolving assessment of risks to guide its decisions,” RBA reported. “In doing so, it will pay close attention to developments in the global economy and financial markets, trends in domestic demand, and the outlook for inflation and the labour market.
“The board is focused on its mandate to deliver price stability and full employment and will do what it considers necessary to achieve that outcome.”