Fresh from the release of his company’s $1.5 billion sales performance for Q1, Gerry Harvey says he is confident that interest rates will eventually move lower to an overnight cash rate of one percent. But this places him at odds with the Australian Retailers Association (ARA) which has issued two statements in the past 24 hours to re-inforce its message that retailers will suffer following the Reserve Bank of Australia’s (RBA) decision yesterday not to lower the rates.
In its first statement the ARA expressed disappointment at the RBA’s decision to leave the cash rate unchanged.
“The ARA has been calling for a reduction in interest rates for some time, and we are disappointed that this has fallen on deaf ears,” ARA executive director Russell Zimmerman said.
“The ARA hopes that this does not lead to a restriction by consumers on Christmas purchases, which is the retail sector’s peak trading period. For Christmas spending to remain buoyant and top Christmas 2014’s figure of 42.5 billion, we need for consumer confidence to remain high.
“An interest rate cut would have provided consumers with more discretionary dollars in their pockets and higher confidence, which generally leads to a greater willingness to spend,” he said. “With one more meeting of the RBA before the end of calendar 2015, the ARA will be hoping for a last minute interest rate reprieve in December.”
However, Harvey has told the media that he believes rates are headed “toward one percent and not three percent” adding that he doubted there would be an affect on the confidence of shoppers leading into the crucial Christmas trading period.
He claims that a small shift in rates either way was no longer enough to really influence sentiment, particularly now that the big four banks have shown they are prepared to undertake out-of-cycle rate increases.
In its second statement this morning the ARA re-iterated that it believes that Christmas sales hang in the balance. See story ‘ABS: household goods trend above 6%’.