Retailers and hospitality operators will be worried by Tuesday evening’s 0.25 per cent cash rate rise as they are the most susceptible to changes in consumer behaviour, according to National Retail Association (NRA) CEO Greg Griffith.
Markets were caught by surprise by the Reserve Bank of Australia’s decision to increase the rate given inflation has been easing in recent months. Analysts like Brett Reynolds, chief investment officer at Tiger Brokers Australia, warned that listed companies who fail to meet sales projections can expect to see “strong falls” in their share price.
“The RBA will be coming towards the end of this raising cycle, but another raise is likely in winter,” Reynolds said.
Griffith, meanwhile, called for a more pragmatic approach to interest rate rises moving forward to help restore business confidence.
“The RBA’s own research shows current inflation is driven by supply issues, which is now easing, but interest rate hikes only work to slow demand. With our tight labour market, consumer spending is maintaining a level of consistency that prolongs the impact of inflation,” Griffith said. “This complex trade-off between economic activity and slowing inflation means retailers are being stretched in different directions, and it’s time to take a different approach.”
This story first appeared on our sister publication Inside Retail