The Grinch Who Stole Christmas: RBA Hikes Cash Rate

The Australian Retailers Association (ARA), has said yesterday’s decision by the RBA to increase the cash rate to 4.35 percent, a twelve year high, is a significant blow for the retail industry heading into the all-important Christmas and holiday trading period.  

ARA CEO Paul Zahra said the decision dampened retailers’ “cautious optimism” heading into Christmas.  

“Retailers and Australians are already under significant pressure, and Melbourne Cup Day’s rate increase will only pile on further pressure,” Mr Zahra said.  

 “This rate increase will have a significant impact on discretionary spending, at a time where many retailers are struggling to remain sustainable due to the rising cost of doing business.  

“Christmas and the holiday season are when discretionary retailers make up to two-thirds of their profits to sustain them during the winter months and hence, they will be devastated by today’s decision.” 

In October ARA has warned retailers not to hold out for a Christmas sales boom, predicting a modest $66.8 billion spend over the November to December 24 trading period, almost the same as last year. However, the projected spend is subject to the RBA’s monetary decisions and is predicted to be effected by the rates rise. 

Recent research from PayPal in its 2023 Holiday Survey found that even prior to this decision, 75 percent of Australians are planning to spend less this Christmas, up from 40 percent last year. The cash rate rise will further put pressure on Australian’s already tight budgets. 

“Continued interest rate hikes have the dual effect of reducing customer spending whilst also increasing business costs – during a time where the industry is already under enormous pressure,” Mr Zahra said.    

“In context, having the same level of Christmas spending as last year is concerning, particularly given we’ve seen the population grow by more than one million over the past year with more migrants returning as well as international students and inbound tourism along with price increases by unavoidable supply chain cost increases, particularly in food. 

“Today’s decision will make the next two months a very nervous period for retailers.”