No rate joy to hurt retailers in the lead up to Christmas

RETAILERS could be in a for a tougher than expected Christmas after the Reserve Bank of Australia failed to deliver a cash rate cut yesterday.

Retailers to face a tough Christmas

RETAILERS could be in a for a tougher than expected Christmas after the Reserve Bank of Australia failed to deliver a cash rate cut yesterday.

Much speculation led to a 50/50 chance of a Melbourne Cup rate cut but the central bank left borrowers without any financial reprieve, keeping the cash rate on hold at two per cent for the sixth consecutive month.

This will leave less money in Australians’ pockets in the lead-up to Christmas which is likely to result in tightened spending.

But a December rate cut hasn’t been ruled out with high unemployment, low inflation and struggling consumer confidence heading up potential for another cut this year.

Australian Retailers Association’s executive director Russell Zimmerman said he was “extremely disappointed” by the RBA’s failure to budge.

Extremely disappointed ... Australian Retailers Association’s executive director Russell Zimmerman is not happy that no rate cut was passed

“Confidence won’t remain as high as it should have, it would have been a much better Christmas if the Reserve Bank reduced the interest rate,’’ he said.

“Our concern is we hope it doesn’t lead to restrictions by consumers on Christmas purchases which is the obviously the retailers’ big trading period.”

Last year Australians spent a whopping $42.5 billion in Christmas sales but without an interest rate drop, Mr Zimmerman said it would make it a tougher seven weeks for retailers ahead of December 25.

AMP chief economist Dr Shane Oliver also said the decision to keep rates on hold will result in restrained spending by shoppers.

“The trouble for retailers now is the rate hikes by the big banks will flow through,’’ he said.

“I think a December rate move now is quite possible, I will pencil one in but it also may be that the RBA wait until February to move.”

The big four banks and also AMP and Suncorp Bank all announced hikes to their home loan interest rates in recent weeks and it will hit borrowers hip pockets later this month.

United ... The big four banks are hiking up interest rates on home loans

They blamed the increases on their need to raise more capital ahead of the next financial year.

Latest figures by financial comparison website Canstar found on a $300,000 30-year home loan the average standard variable rate is 4.83 per cent compared to the average three-year fixed rate at 4.53 per cent.

The average standard variable rate of the big four banks is 5.61 per cent which factors in their out-of-cycle hikes later this month.

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Originally published as No rate joy to hurt retailers in the lead up to Christmas