The RBA has cut the cash rate to a new record low of two per cent, saying falling commodity prices, weak business investment, and subdued Government spending are dragging on the economy.
Russell Zimmerman, executive director of the Australian Retailers Association (ARA), said today’s decision will help to provide Australian businesses with much needed relief and is a step toward building higher levels of business and consumer confidence.
“While a reduction in rates is always welcomed, this alone is not enough to stimulate business and jobs growth. Retailers are now looking ahead to the Federal Budget to ensure small business tax cuts are being delivered in order to boost their bottom lines.
“Low interest rates are acting to support borrowing and spending and today’s rate cut is certainly a positive step, however, business growth must still be supported with a solid plan in the upcoming Federal Budget,” Zimmerman said.
Anna MchPhee, CEO Australian Retailers’ Association (ANRA), agreed saying the rate cut represents only one part of the measures that can boost both business and consumer confidence.
“We encourage Governments to consider the long term impact of not tackling important reform to promote economic growth and create jobs.
“Ahead of next week’s Federal Budget, retailers are wary of the potential impacts of the Budget to consumer confidence given the downward effect last year,” said McPhee.
National Retail Association CEO, Trevor Evans issued a more cautious response, saying a sizeable amount of any additional spending could go offshore due to the ongoing failure of State and Federal Governments to close the GST loophole for online purchases.
“The fact is that today’s rate cut by the RBA may have the effect of stimulating economies other than Australia’s, if consumers decide to do their extra spending online in order to avoid Australian taxes and charges.
“If politicians and policy makers are serious about boosting domestic economic activity, then they should move to close the GST loophole which encourages Australians to shop from overseas businesses.
“This would provide an instant boost to local spending, generating higher levels of employment and economic activity.”
Glenn Stevens, RBA governor, said public spending is scheduled to be subdued.
“The economy is therefore likely to be operating with a degree of spare capacity for some time yet,” Stevens said.
“Low interest rates are acting to support borrowing and spending, and credit is recording moderate growth overall, with stronger lending to businesses of late,” he said.
He added that although the Australian dollar has dropped noticeably against the US dollar it will have to fall further because of the large declines in commodity prices.