Interest rate hikes a 'handbrake' on retailers

The Australian Retailers Association said retailers are worried that the latest interest rate rise would frighten consumers into financial hiding just in time for the 2009 Christmas trading season.

ARA executive director Russell Zimmerman said the Reserve Bank's interest rate strategy was putting a handbrake on this year's economic improvement instead of letting the momentum of Christmas retail spending push recovery into full swing.

"While there is some relief that the RBA didn't raise the official cash rate by 50 basis points last month (as some economists were predicting), retailers are still concerned about the impact on the up-coming Christmas trading season which is crucial to further retail and economic recovery.

"Retailers are one of Australia's largest employers and for further economic recovery they must have incentive to hold onto staff.

"Not only do retailers have increased wage bills as a result of the modern retail award to cope with next year, but now the RBA is hitting them from the other side by taking cash away from consumers who are still worried about their jobs," he said.

"When coupled with October?s rate rise, the latest decision will take almost $100 per month away from working families with an average $300,000 home loan.

"Instead of letting retail recovery gain some much needed momentum over the Christmas and post-Christmas trading period, the RBA is taking cash away from consumers at the worst possible time.

"Retailers have been dealing with inconsistent sales growth and teetering on the brink of recovery for most of the year," he said,

"They are relying on a strong Christmas trading period to really shift this into full gear.

"Once again, the ARA is calling on the RBA to delay any further interest rate rises until at least February 2010," Zimmerman said.