Reserve Bank holds as business leaders list concerns
Increased consumer confidence and spending should give retailers a warm glow heading into the crucial Christmas shopping season, even if the presence of internet giant Amazon sent a chill down the spine of some.
The Reserve Bank wasn’t about to upset the apple cart, keeping the cash rate at a record low 1.5 per cent after its monthly board meeting on Tuesday, as widely anticipated by economists.
“The low level of interest rates is continuing to support the Australian economy,” central bank governor Philip Lowe said in a statement.
“One continuing source of uncertainty is the outlook for household consumption…incomes are growing slowly and debt levels are high.”
Still, new figures showed retail spending grew 0.5 per cent in October, the largest monthly rise since May, having suffered a torrid time in the intervening months.
Australian Retailers Association executive director Russell Zimmerman said annual retailing growth of less than two per cent was “extremely disheartening”.
However, he still expects the Christmas spend-up to reach a forecast $50 billion worth of sales in the six weeks of the seasonal shopping period.
He has found a great amount of “positiveness” when touring around stores.
“Things are looking pretty good at the moment, I won’t be surprised if that $50 billion is beaten,” he told Sky News.
The retail data coincided with the weekly ANZ-Roy Morgan consumer confidence index, rising 0.7 per cent.
However, Wednesday’s national accounts for September quarter – a comprehensive guide to the state of the economy – is expected to show more modest household spending compared to the previous quarter.
Economists expect overall economic growth to have expanded by 0.7 per cent in the September quarter, which would take the annual rate to three per cent.
This would be up from 1.8 per cent as of the June quarter.
Some economists had trimmed their growth forecasts after a separate report on Tuesday showed net exports – exports minus imports – will make no contribution to growth when a small input had been expected.
Dr Lowe said the bank’s central forecast is for GDP growth to average around three per cent over the next few years.
It was the Reserve Bank’s final board meeting of the year, and it won’t gather again until February.
Business leaders’ concerns
Meanwhile, at a time when the Turnbull government is pursuing corporate tax cuts, a new survey suggests tax reform, or lack of, is not keeping Australian business leaders awake at night.
Instead, bosses are more worried about innovation – especially as it relates to digital technology – cost competitiveness and energy prices.
These are the top three findings in research conducted by consultants KPMG when 200 firms were asked about their main worries heading into 2018.
“There are no shortage of voices in the public debate loudly declaring what is top of mind for business, but this report takes a measured and analytical look at the real issues of primary concern to business leaders,” KPMG Australia CEO Gary Wingrove said on Wednesday.
While no one can confidently predict the exact disruptions that lie ahead, organisations that get their innovation culture right will be the ones who can harness change to their benefit, he said.
KPMG tax partner Grant Wardell-Johnson said while traditionally Australia had a high cost of labour, it had a below-average cost of electricity for industrial users.
“Unfortunately, this favourable cost-competitive position has been eroded over the past two years as domestic prices of electricity and gas have soared,” he said.
The survey also suggested Australia’s corporate tax system acts as a further impost on firms’ ability to earn internationally competitive returns.
However, tax reform didn’t make the top 10 concerns.
TOP 10 ISSUES OF CONCERN FOR AUSTRALIAN BUSINESS LEADERS IN 2018.
1 – Digital and Innovation
2 – Cost competitiveness
3 – Energy
4 – Regulation
5 – Government efficiencies
6 – Public trust
7 – Infrastructure and liveable cities
8 – Fiscal sustainability
9 – Big Data
OTHER AREAS OF IMPORTANCE BEYOND THE 10
- Climate change
- Tax reform
- Social cohesion
- Affordable housing
- Defence and security
- Indigenous business
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