The Reserve Bank of Australia has raised interest rates for the fifth time this year, prompting peak bodies to call for Federal Government intervention amid growing concerns about the severe impact on businesses.

The cash rate rose by 25 basis points to 4.85 per cent on Tuesday, marking the fifth hike this year and the highest level since November 2008. The hike comes as annual inflation climbed to 4.3 per cent.

The Australian Retail Council (ARC) warned that the decision will further squeeze household spending, as retailers enter the crucial Black Friday and Christmas trading period. 

“There will be families now reassessing their Christmas budgets, while retailers are heading into their most important trading period with stock ordered, staff and bills to pay,” said ARC chief economist Glenn Fahey.

“For many small businesses, this period builds the cash reserves that carry them through the quieter months. The consequences of a disappointing ‘peak season’ can last well into the following year. It can be make-or-break.”

According to Fahey, higher interest rates will reduce demand across the economy, especially discretionary retail categories.

“The inflation numbers show retailers cannot simply pass on every increase when their customers are watching every dollar, even when faced with higher fuel costs flowing through freight, deliveries and the cost of getting products onto shelves.

“Retailers need a strong Christmas to support jobs and invest in the year ahead. Today’s decision makes that job much harder,” he added.

The Business Council of Australia (BCA) described the latest rate increase as “world-leading”, given the country has endured more interest rate rises this year than any other major advanced economy.

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