The Council of Small Business Organisations Australia (COSBOA) hopes the Reserve Bank of Australia’s (RBA) recent rate cut will promote consumer spending in Australia’s retail and hospitality sector.
The RBA made its third rate cut of the year on 12 August, dropping the cash rate from 3.85 per cent to 3.6 per cent.
“Our hope is that this rate cut lifts consumer spending, which will help improve cash flow for small businesses in what can only be described as tough economic conditions,” says COSBOA Chair Matthew Addison.
The RBA says the current unemployment rate of 4.3 per cent made the rate cut “appropriate”, with easing market conditions and slightly easing inflation contributing to the decision to cut rates. The cash rate is now the lowest it has been since April 2023.
“With underlying inflation continuing to decline back towards the midpoint of the 2 to 3 per cent range and labour market conditions easing slightly, as expected, the Board judged that a further easing of monetary policy was appropriate,” and RBA statement reads.
However, the RBA says the overall economic outlook remains uncertain due to a range of domestic and international factors.
“Businesses in some sectors, however, continue to report that weakness in demand is making it difficult to pass on cost increases to final prices. There is a risk that consumption growth is a little slower than expected, which could weigh on growth in aggregate demand and lead to weaker labour market conditions.
“Alternatively, as real incomes and wealth continue to rise, households might choose to consume more and save less than expected.”
The move to cut the cash rate was largely expected by market analysts, especially following the RBA’s decision to hold rates in July. The decision to cut rates by 25 basis points to 3.60 per cent was unanimous.
