The Reserve Bank has today cut the official cash rate (OCR) by 50 basis points to 4.75%. Video / NZ Herald
Retailers have shared their excitement for the “early Christmas present” delivered by the Reserve Bank.
The decision to cut the Official Cash Rate (OCR) by 50 basis points to 4.75% has industry leaders hoping it will boost consumer spending leading into thefestive season.
Briscoe Group chief executive Rod Duke said the decision was one of the first signs of good news as consumers with mortgages will have a bit more money in their pocket.
“I think it’ll mean, for all retailers, there’ll be just a bit more confidence in the suburbs,” Duke said.
“It’s really the first step. It always takes a little while, in my experience, for these things to drift through and be meaningful for people with housing interest loans and the like, but it is a mandatory first step.”
Retail NZ chief executive Carolyn Young said the decision was an early Christmas present for the sector.
“Coming at the beginning of Q4, this will be welcome news for retailers as they prepare to enter the period that is traditionally the busiest time of year for retail sales,” Young said.
“Strong pre-Christmas sales are critical to retailers meeting their annual sales targets.”
She was hopeful that the decision would turn around consumer confidence, which continues to report positive signs after prolonged stagnation.
Luke Fossett, general manager of Australia and New Zealand at GoCardless, said while the decision is good news, it wouldn’t have an immediate impact on spending.
“We’re not out of the woods yet; businesses must continue to monitor their finances closely and evaluate their payment strategy,” Fossett said.
“Given recent predictions by economists that most Kiwis will feel a tightening of their household budgets for many months to come, consumers will understandably be wary at the checkout. This means consumer spending is expected to continue its decline.”
Total retail spending (excluding services and non-core) is down 2.9% compared to last year, even after reporting the first increase in card transactions in seven months.
Lauri Solecki, Dress Smart Auckland Centre Manager.
Dress Smart Onehunga centre manager Lauri Solecki was pleased with the decision and expected that it would increase consumer spending right in time for the holiday season.
“What a great relief for certain Kiwis who are really feeling the pinch in this cost-of-living crisis,” Solecki said.
“This rate cut where people feel more confident in the market, especially going into Christmas, is going to be a relief for retailers and that’s good news.”
After the Reserve Bank’s decision to cut the OCR by 25bps back in August, Solecki said that it translated immediately to a significant surge in foot traffic and sales at the mall across pretty much all retailers.
She expects the reaction to be similar thanks to the larger cut this time round.
“So last time in the August cut, we saw this almost immediate response from the public. We saw a double-digit foot-count growth happen straight after that announcement,” Solecki added.
Business Canterbury chief executive Leeann Watson echoed Young’s sentiment, hoping it would provide a further boost to consumer confidence.
“Following the previous OCR announcement in August, we saw quite a significant improvement in expectations for both the Canterbury economy and individual business performance, a big turnaround from what we saw in the results from May,” Watson said.
“This optimism indicates that recent drops in inflation and interest rates are positively influencing the business operating environment, even as many companies continue to navigate the challenges of what has felt like an elastic band economy over the past few years.”
Tom Raynel is a multimedia business journalist for the Herald, covering small business and retail.
