Retailers are glad that at least the Reserve Bank is injecting some certainty at a time of political upheaval surrounding the budget.
Opinion polls have weakened and consumer confidence has slipped but at least the Abbott government didn’t find itself having to explain away an interest rate rise.
On a day when a range of budget measures came into play, including the temporary deficit levy on higher income earners, higher borrowing costs would have been a further blow to confidence.
As it is, the latest Newspoll showed support for the government slipped further after the May budget, to stand 10 points below last September’s election-winning vote.
It puts Labor in an election winning position of 55-45 per cent on a two-party preferred basis.
At the same time, the latest ANZ-Roy Morgan weekly survey of consumer confidence showed a modest fall of 0.3 per cent after small gains in previous weeks, leaving it down nine per cent since late April when budget leaks first emerged.
As such, retailers were thankful that the Reserve Bank kept the cash rate unchanged at an all-time low of 2.5 per cent at Tuesday’s board meeting.
“This period of low and stable interest rates should provide consumers with a level of certainty,” Australian National Retailers Association chief executive Margy Osmond said in a statement.
May retail data on Thursday will be the first gauge of how much weak confidence translated into spending habits around budget time.
RBA governor Glenn’s Stevens post-meeting statement was almost identical to the one he released in June.
That is, monetary policy is appropriately configured to foster sustainable economic growth and inflation consistent with its target band.
The most prudent course is likely to be a period of stability in interest rates, he said.
However, he again expressed concerns that the Australian dollar remains high by historical standards, particularly given the declines in key commodity prices.
“Hence (it) is offering less assistance than it might in achieving balanced growth in the economy,” Mr Stevens said.
Australian National University economist Warwick McKibbin told a conference that global investment is still likely to be drawn to Australia because of lower monetary policy adjustments elsewhere around the globe.
“It’s the reason why I think the Australian dollar is likely to be getting stronger not weaker,” the professor of public policy told the university’s Crawford Leadership Forum in Canberra.
“It would be nice if the Australian dollar would drop.”