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Why some businesses say the govt’s race to stop inflation is a losing bet

The National Retail Association has warned that the Reserve Bank of Australia’s interest rate hike will only impede Christmas spending as the lag effect of seven consecutive rises catches up to consumers.

Interim CEO Lindsay Carroll said with a lack of evidence that the rapid interest rate hikes have managed to control inflation, the official rate increase to 2.85 percent will only bite household consumption.

“The rise will weigh heavily on Australian consumers at a time when shoppers are reassessing their spending intentions.

“Even though retail turnover was up 0.6 percent in September, households have only started paying the third of the fourth hike, and their spending power will soften as the direct cash hit from the rate rise is felt harder in mortgage repayments in the months to come.

“We are seeing consumers spend more on essentials from the cost of living pressures, but the retail is reliant on shoppers to be able to afford those special end-of-year celebrations.

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“The NRA’s Consumer Sentiment Report released last month revealed that 71 percent of consumers had changed their spending behaviour amidst inflationary pressures, meaning retailers must be prepared to match their offerings with their consumers’ ability to spend.”

Meanwhile, the key drivers behind the current inflationary conditions, fuel and energy costs, remain unchanged.

“The inflation we are dealing with at the moment is coming from the supply side and movement of goods between nations.

“High oil and gas prices and flooding on the east coast pushing up the cost of produce are not affected by higher interest rates,” Ms Carroll said.

Source: NRA

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