Retailers in Australia are set to see some relief after the Reserve Bank of Australia (RBA) announced a further reduction to the official cash rate yesterday (August 6).
A 25 basis point reduction has brought the rate down to the lowest level seen since 1959 at 2.5 per cent.
Citing a number of economic trends seen over the past few months, RBA governor Glenn Stevens stated that the board found it prudent to lower the cash rate for the second time this year.
“In Australia, the economy has been growing a bit below trend over the past year. This is expected to continue in the near term as the economy adjusts to lower levels of mining investment,” he said in an August 6 statement.
Furthermore, due to the reduction in mining investment across the country it has resulted in the unemployment rate slowly edging higher to reach 5.7 per cent in June.
The RBA’s decision has been welcomed by the retail sector in the country, with Australian National Retailers Association (ANRA) chief executive officer Margy Osmond stating that it will provide a “leg-up” for retailing in Australia.
“It’s now the responsibility of the banks to fully pass on today’s rate cut and ensure the policy intentions of the RBA can be felt by households and spending can get moving again,” said Ms Osmond in an August 6 statement.
“A federal election traditionally puts a dampener on consumer spending in the run-up to polling day but today’s RBA decision should help to boost consumer confidence and spending beyond September 7.”
And in further encouraging news, there may be room for additional reductions this year after Mr Stevens stated that the board may consider another, “should that be required to support demand”.
“The Board will continue to assess the outlook and adjust policy as needed to foster sustainable growth in demand and inflation outcomes consistent with the inflation target over time,” Mr Stevens concluded.