Retailers are once again caught between the cost of living and the cost of doing business as the Reserve Bank increased the cash rate by 25 basis points on 3 May.
Industry body the National Retail Association said small businesses across Australia have been held back from economic growth amidst soaring interest rate rises and inflated costs biting into their bottom line.
“The impact of flatlining consumer spending and increasing business costs have caused some notable business insolvencies here and overseas,” CEO Greg Griffith said.
“This is cause for worry for retailers and hospitality operators which are the most suspectable to changes in consumer behaviour.
“Business confidence will only be restored with a more pragmatic approach to interest rate increases.”
Data from the Australian Bureau of Statistics last month revealed inflation fell more than expected in the March quarter, to 7 per cent, and corresponding evidence overseas also suggests inflation is cooling as supply chains have begun to normalise.
“The RBA’s own research shows current inflation is driven by supply issues, which is now easing, but interest rate hikes only work to slow demand.
“With our tight labour market, consumer spending is maintaining a level of consistency that prolongs the impact of inflation.
“This complex trade-off between economic activity and slowing inflation means retailers are being stretched in different directions, and it’s time to take a different approach.”
Mr Griffith said retailers will be watching the Federal Budget announcement next week for economic relief for both businesses and consumers.
“The industry is calling for budget support measures that address the cost of living, strengthen the labour market and the transition to data and digital to help smaller businesses get ahead of the curve.
“Further hikes will dampen business recovery particularly as we address energy costs and an imminent wage increase.”
The National Retail Association is the voice of modern retail, representing more than 60,000 stores across Australia. It has been serving businesses in the retail and fast-food sectors for close to 100 years.
For more information, please contact the NRA media unit at [email protected] or 1800 RETAIL (738 245).