The Executive Director of the Australian Retailers’ Association, Russell Zimmerman, has welcomed the decision by the Reserve Bank of Australia to cut official interest rates by 25 basis points, or a quarter of one percent.
Speaking after the RBA delivered its decision – the second reduction in as many months – Mr Zimmerman said it would deliver “a shot in the arm” for consumer spending, and would help to stimulate economic activity.
“A look back over history suggests interest rate movements either way typically come in twos – whether in consecutive months or in fairly short order – so yesterday’s decision isn’t a real surprise,” Mr Zimmerman said.
“Taken in tandem with the reduction made by the RBA in June, we think yesterday’s decision will deliver a shot in the arm for consumer spending, which in turn should help the economy pick up a bit of pace,” he added.
Mr Zimmerman said he had heard some media comment after the June decision that interest rate cuts were more likely to be banked than spent, but said consumer behaviour in the past suggested otherwise.
“For every $100,000 Australians owe on mortgages, yesterday’s cut puts about $15 per month in their pockets: even if they banked the first one, we know successive rate cuts are likelier to be spent than not,” he said.
Mr Zimmerman said two reductions in interest rates, whilst reflecting tough retail trading conditions and sluggish economic conditions generally, were welcome stimuli that would also help traders selling imported goods through the downward exchange rate pressure they would exert, but said more needed to be done.
“Parliament reconvened yesterday for the first time since the federal election in May. The retail industry would like to see the full Coalition package of PAYE income tax cuts legislated without delay,” Mr Zimmerman said.
Mr Zimmerman said recent interest rate cuts – in tandem with income tax cuts, and ongoing attention to ways energy prices could be driven sustainably lower – offered a bedrock on which a suite of measures to drive consumer spending and accelerate economic growth could be built.
“Given the consensus that we face rocky economic times unless something is done to avoid them, we call on all parties to support the tax package being legislated without changes or delays,” Mr Zimmerman concluded.