AFGC urges Reserve Bank to cut cash rate for Christmas

The AFGC hopes another cut in interest rates will send a positive message to consumers in time for Christmas trading.
The AFGC hopes another cut in interest rates will send a positive message to consumers in time for Christmas trading. Nicholas Falconer

THE Australian Food and Grocery Council has called on the Reserve Bank to cut the cash rate when it meets next Tuesday amid fears of a "modest" Christmas trading period.

Year-on-year retail growth of 2.9% is forecast for December in the AFGC CHEP retail price index - well below the 10-year average of 5% and softer than year-on-year growth in the September quarter of 3.7%.

While retail trade turnover will experience a slight contraction from $21.56 billion in September to $21.52 billion in November, AFGC CEO Gary Dawson said lower interest rates may help to boost retail spending.

He said while the RBA's decision to cut the cash rate by 1% since May had helped boost retail trade, more was needed heading in to Christmas.

"But overall the broader economic backdrop is creating a soft retail environment heading into Christmas," Mr Dawson said.

"We're hoping that another cut in interest rates will send the right signals to households so they embrace this summer season with more optimism.

"Food manufacturers are facing an environment where sluggish retail conditions, rising input costs on everything from commodities to labour to energy and retail price deflation continues to cut margins, placing the sector under increasing pressure.

The AFGC CHEP retail Index attempts to predict trend growth in nominal retail spending.

It is a collaborative project between the AFGC and CHEP Australia, with the help of Deloitte.

It uses CHEP transactional data based on pallet movements and is a lead indicator of ABS retail trade data.

The next AFGC CHEP retail index will be released in late January.

Topics:  cash rate christmas economy reserve bank of australia retail shopping

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