Retail NZ chief executive Carolyn Young said Wednesday’s cut to the official cash rate was unlikely to see shoppers flooding retail stores just yet.
The Reserve Bank cut its cash rate by 25 basis points to a three-year low of 3 percent, and left the door open for further reductions.
Young said the group’s latest quarterly report from April to June,showed 62 percent of retailers did not meet their sales targets.
But she said talk of lower interest rates had them feeling more positive about the economy.
“Businesses are optimistic that we are through the worst of it, but their trading levels aren’t showing that they are. Optimism is based on emotion and trading sales figures are based on fact.”
She said the next six months would be crucial for businesses facing closure and hoped to see the Reserve Bank deliver on more aggressive cuts.
Previous OCR drops had not delivered the hoped-for economic boost, she said.
“We’re not seeing growth, we’re not seeing many green shoots, we’re seeing businesses that are still being challenged. Businesses closing, laying off staff, doing restructures. We know a lot of retailers are still trading at a loss.
“It’s a really difficult economic environment. Consumer confidence needs to be higher in order for retail to survive.”
Young said there was always a lag between rate changes and spending habits, and right now, people were focused on paying for the essentials.
Meanwhile, Kelvin Davidson, chief property economist at Cotality, was not expecting any big changes in the housing market following the lowered OCR.
He said despite significant falls in the rate over the past year, the housing market had remained flat.
“The influence of low mortgage rates is already out there, yet the housing market isn’t really responding.
“I think what were seeing on the other side of the ledger is restraint from the weak economy and weak labour market, people have lost jobs and even if you’ve kept the job there’s that spillover impact on confidence.”
Davidson said until there was a shift in the economy and employment rates, the housing market was unlikely to change, and he expected it would remain subdued for the next six to nine months.
