Australian National Retailers Association CEO Margy Osmond said the $10.4 billion economic stimulus package could inject up to $3.5 billion directly into the retail sector.

The Australian National Retailers Association has said the Reserve Bank of Australia’s decision to further cut the cash rate by 1% to 4.25% is completely justified after the latest retail figures show Australians continue to be cautious spenders. In October retail sales grew by only 0.2%.

ANRA CEO Margy Osmond said, “Not even the 1.25% in interest rate cuts boosted confidence in October. This is not surprising given the deteriorating forecast for the Australian economy was beginning to unfold.

“The real test of this interest rate cut on consumer confidence will be more obvious during the January/February sale period when there’s not the emotion that buoys Christmas spending,” she said.

Osmond said retailers are also waiting to see what lasting impact the economic stimulus package, which represents 1% of GDP, will have on the Australian economy.

Possible retail injection up to $3.5 billion
“The cash bonus which will begin flowing into bank accounts next Monday, could inject up to $3.5b directly into the retail sector based on the results of our latest consumer survey,” she said.

The ANRA’s latest survey found 10% of Australians receiving the bonus will spend it on Christmas gifts or Christmas food. “Close to 4% plan to spend it shopping for themselves, 26% will put it towards other living expenses, 19% will pay down their mortgage, 21% will pay off credit cards and personal loans and 20% will save it,” Osmond said.

Australian Retailers Association executive director Richard Evans said the industry body sees strong growth to return by September 2009.

The Australian Retailers Association applauded the Reserve Bank’s decision. However, executive director Richard Evans said retailers “urgently” need the interest rate on credit cards to be lowered.

"New research has shown consumers will still be using credit in high numbers over the Christmas period and some relief from high interest rates on cards would certainly be feasible,” he said.

According to Evans, "This fourth successive rate cut will be a shot in the arm for consumer confidence and will be seen in the market around May/June next year - just when ARA modelling indicates growth will return.

Strong growth to return by September
"We now see strong growth to return by September 2009, but the rest of the economy lags three to six months behind in the retail sector cycle. This means there may not be good news for other industries until December 2009/January 2010," Evans said.