Consumers and retailers are doing it tough, says ARA

The RBA has again responded to retailers and consumers with a hold on interest rates to allow the market to correct itself.

According to the Australian Retailers Association (ARA), the last four interest rate rises have had a major impact on consumer spending.

“Australian consumers are doing it tough – and so too are the retailers,” says ARA’s executive director Richard Evans.

“Although there has been an increase in spending across the board (weighted average of the eight capital cities all groups March 07/March 08 was up 4.2 per cent), the most significant contributors were automotive fuel (+5.4 per cent), pharmaceuticals (+13.1 per cent), electricity (+6 per cent), rents (+2 per cent) and other financial services (+2 per cent).”

All of these categories are essential services and according to Evans, consumers have now been forced to rein in spending in other categories such as furniture, audio, visual and computing equipment, and accessories.

Evans warns that these increases in essential services may lead to into other inflationary pressures including a wage price spiral and a heavy demand on essential services.

“From a social perspective, with this increase in demand, the cost of essential services will continue to rise and we can already see a change in consumer behaviour. There is increasing evidence of ‘drive offs’ in petrol stations and more shoplifting of small essential items such as baby food and razors,” he says.