Last week the Reserve Bank of Australia (RBA) made the first change to interest rates in nearly three years when it cut the official cash rate to a record-low 1.25 per cent. This rate cut merely confirms what we in the retail sector have known for some time – that consumer confidence is in desperate need of a boost.
Indeed, on the very same day that the RBA reduced interest rates, the Australian Bureau of Statistics (ABS) retail trade report for April 2019 showed that turnover went backwards nationwide by 0.1 per cent. It should be noted that this was a month that was almost entirely encompassed by the federal election campaign – people tend to spend less during elections – but it should certainly jolt our elected representatives into action.
Although we are optimistic that the rate cut will provide everyday Australians with a bit more cash in their back pocket to spend at the shops, it should not be viewed as a panacea. Tax cuts were front and centre in the recent federal election and look set to be the number one item on the agenda when Parliament resumes in July.
The Government has a comprehensive package that includes cuts to personal income taxation and for businesses. The Opposition agrees with the initial stages of the package, however, opposes later parts of it. This has left the bill deadlocked as both sides play chicken, with the Government refusing to split the package and Labor insisting on voting first on areas where there is agreement.
The NRA isn’t going to lecture either side on political tactics other than to point out that the longer this cat-and-mouse game continues, the longer away we are from tax relief that would help stimulate the economy.
In the meantime, with the election out of the way, and the uncertainty of a hung parliament avoided, we do expect some revival in consumer confidence. This, combined with the rate cut and a resolution to the tax standoff, will hopefully see retail begin to head in the right direction during the second-half of 2019.
All the best for the week ahead!