Christmas spending patterns would be significantly hampered by a December interest rate increase
Interest rate rise could ‘ruin’ Christmas for jewellers
Posted December 07, 2010 | By Sonia Nair
Retailers are waiting in anticipation for the Reserve Bank of Australia’s interest rate announcement later today, as a further increase could spell doom for the upcoming Christmas trading season.
The Australian Retailers Association (ARA) warned against raising the interest rate again after a third of consumers said they were planning to cut back on the amount they spend on Christmas presents this year, according to the ARA’s 2010 Consumer Christmas Survey.
Figures recently released by the Australian Bureau of Statistics show that spending on retail fell by 1.1 per cent in October. However, spending on clothing, footwear and personal accessories – including jewellery – was the worst hit – down 4.6 per cent.
In November, the Reserve Bank raised the interest rate by 25 basis points (0.25 per cent) to 4.75 per cent as part of efforts to help curb inflation.
ARA executive director Russell Zimmerman said retailers are concerned the 1.1 per cent slump in October trade was a result of the November interest rate rise, which he believes will damage Christmas trade.
“The RBA would all but ruin Christmas for retailers if it chooses to hike interest rates in December when more than 82 per cent of consumers will be finalising their Christmas shopping,” Zimmerman said.
“Price sensitivity among consumers is also showing, with up to 70 per cent of survey respondents saying price reductions would make them shop more in the lead-up to Christmas.”
However, economic analysts have forecast that the Reserve Bank is unlikely to increase interest rates again until March or April next year, due to weak retail sales and soft gross domestic product.
More reading:
Cost-cutting Aussies still love jewellery
Hard lessons from a tough year