Aussies expected to splurge on Boxing Day in hopes of a rate cut
Aussie households are about to make a $3.7bn Boxing Day bet, spending big on the sales in the hope a rate cut will arrive to give them some relief early in 2025.
NSW
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Australian households will make the most of discounted holiday sales splurging on Boxing Day in hopes of a rate cut in early 2025 to ease cost of living pain.
Though soaring prices have brought many households to their knees, retailers are expecting a $3.7 billion windfall over the next five days with economists predicting the post-Christmas shopping spree, which follows strong spending during last month’s Black Friday and Cyber Monday sales, will be the last cash splash before Australians go into financial “hibernation” for the remainder of the Summer.
Households’ big gamble on an imminent rate cut comes as minutes from the Reserve Bank of Australia (RBA) December meeting released this week revealed the board was “increasingly confident” about inflation moving sustainably to the target required for a rate cut.
The first opportunity to reduce the cash rate, which has been on hold at 4.35 per cent for more than a year, would be when the board meets in February, though May is considered the safer bet.
AMP chief economist Shane Oliver said he expected Australians would want to “take advantage” of the Boxing Day discounts, before retailers would see “a bit of hibernation” until there was more certainty around rates.
“We saw strong spending through October, November in the run up to and through the Black Friday sales and I suspect that people will have held some of their spending back for the Boxing Day sales as well,” he said.
“So there’s a bit of optimism around that things might get better next year with some rate cuts, but by the same taken I think Australian consumers are still fairly cautious and focused on getting a bargain when they can.”
Independent economists Saul Eslake said higher spending could also be attributed to households with either low, or no mortgage remaining, rather than the about a quarter of mostly 25 to 35-year-old homeowners who bought within the last five years when interest rates were at record lows.
“The ones who have really been squeezed might be hopeful that there’s a rate cut in February, but I suspect most of them actually want to see it happen before they believed it and went out spending,” he said.
Retailers and restaurants are expected to rake in $24bn over the next three weeks, including $1.3bn forecast to be handed over at the register in the next 24 hours, according to new data from the Australian Retailers Association (ARA) and Roy Morgan.
ARA chief industry affairs officer Fleur Brown said there was still a “healthy appetite” for sales spending.
“While many Australians used Black Friday to shop earlier than ever for Christmas gifts, the focus for Boxing Day shopping is more typically on a gift for self and for grabbing some of those household necessities and larger purchase items that have been on the shopping list this year,” she said.
Despite the expected sales bonanza, Business NSW chief executive Daniel Hunter said the next few weeks would be “a short-term lifeline for small and medium businesses, but not a long-term survival plan”.
Restaurant owner Fabio Dore of Sella Vinoteca in Randwick said many businesses across Sydney’s competitive hospitality scene were scrambling to stay afloat after major cuts to spending earlier in the year.
“We are hopeful that with cost-of-living pressures this Christmas, people will see the beauty in staying home and supporting local rather than heading interstate or overseas,” he said.
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