The Reserve Bank of Australia (RBA) has announced its ninth consecutive interest rate rise, increasing the cash rate target to 3.35 per cent.
The rate increase, which is the highest in a decade, has been labelled “irresponsible” by Greg Griffith, CEO of the National Retail Association (NRA).
“A lot of Christmas spending occurred in November, and now that we’re over the festive season high, consumers are curtailing their spending habits. This is the perfect time for the RBA to stop, wait and watch its rate hikes take gradual effect.
“Another consecutive interest rate increase is not only irresponsible but could cause an economic downturn and send some small retailers into an early recession with all their competing costs.”
More difficulties could be on the horizon for retailers as Governor Philip Lowe warned that further rate rises are to be expected over the coming months.
“In assessing how much further interest rates need to increase, the Board will be paying close attention to developments in the global economy, trends in household spending and the outlook for inflation and the labour market.”
Lowe said that global inflation remains very high, however, it is moderating in response to lower energy prices, the resolution of supply-chain problems, and the tightening of monetary policy.
“It will be some time, though, before inflation is back to target rates. The outlook for the global economy remains subdued, with below average growth expected this year and next.”
The Australian economy grew strongly over 2022, explained Lowe, and that the central forecast has changed little from three months ago, with GDP growth expected to slow to around 1.5 per cent over 2023 and 2024.
“The recovery in spending on services following the lifting of COVID restrictions has largely run its course and the tighter financial conditions will constrain spending more broadly.”
Griffith said that the retail sector is fully reliant on consumer spending, and while large retailers may cope with slowed economic growth, a downturn would hit small businesses much harder.
“We call on the RBA to wait until small businesses and consumers have picked up the pieces from the RBA’s latest interest rate hike before deciding on another increase next month.
“We also ask the Federal Government to address the true contributors to rising costs, namely supply-side challenges, and rising energy prices, through guided policy that protects small retailers.”
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