Interest rate hike will hit retailers, warns lobby group

A hike in interest rates could have a “serious impact” on small retailers ahead of the Christmas trading period, an industry body has warned.

Speaking ahead of the Reserve Bank’s decision on whether to raise interest rates, the Australian Retailers Association claimed that any increase would add to existing concerns within the industry.

“Retailers have done it tough in the last 18 months,” says Russell Zimmerman, executive director of the ARA. “I think retailers need a fair go at the moment. We’ve seen an election called, which slowed down retail and now we have a minority government which is a bit unstable and is causing uncertainty among consumers.”

“We’ve seen a tangible effect on retail during the period between the election and now, when we didn’t have a government.”

“We are now coming into the Christmas trading period. Around 25% to 30% of retail trade comes around Christmas and any change to interest rates could have a serious impact. We’re concerned that it will push down retail trade.”

The ARA pointed to its consumer spending confidence report, which surveyed more than 1,000 consumers in August that shows that Australian consumer confidence is still fragile.

The report found that any interest rate rise would see 35% of consumers cut back spending on basic clothing and shoes, while 45% will reduce outlay on dining out and entertainment.

Despite the continued uncertainty, however, Zimmermann claims that there is still plenty of scope for start-ups in the retail space.

“There are some great opportunities out there, particularly around the internet,” he says. “Take a look at Kogan – they have a point of difference and they are going gangbusters. There are lots of opportunities out there, the key is to find the right one.”