Reserve Bank tops off a Scrooge's Christmas

Newmarket Business Association

Thursday, 7 December 2006

Reserve Bank tops off a Scrooge's Christmas for the consumer

Auckland's leading retail district says news that the Reserve Bank is holding interest rates "tops off a real Scrooge's Christmas for the consumer."

"With just two and a half weeks until Christmas, retailers naturally want shoppers to be delivered any kind of confidence boost. Unfortunately there's no relief in sight from the Reserve Bank despite a year of heavy household costs for the consumer," said Cameron Brewer, head of the Newmarket Business Association today.

Reserve Bank Governor Alan Bollard this morning announced there would be no change to the Official Cash Rate. It will remain at the relatively high 7.25% - where it has consistently been for the past 12 months.

"Over the past year consumers and subsequently retailers have been hit by costs on a broad front. Relatively high inflation has eroded household incomes this year, as have wayward petrol prices, electricity price hikes, not to mention steep council rate increases, particularly in Auckland. Winter also saw annual growth slow to a five-year low.

"Retailers have had a pretty sluggish year as a result of people's discretionary incomes shrinking. A drop in interest rates this week would have naturally given consumers a confidence boost leading into Christmas, but for understandable reasons that's not going to happen in the foreseeable future.

"Interest rates have been relatively high for a record long period this century. At the same time retailing over the past 18 months has probably been its most patchy since the Asian Economic Crisis of the late 1990s. Let's not forget that in December 2003 the OCR was 5.0% and at the same time in 2001 it was 4.75%," said Mr Brewer.

ENDS

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