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Reserve BankTHE Melbourne Cup interest rate slug could force struggling small businesses to the wall, the sector’s peak lobby group warned.

Council of Small Business of Australia executive director Peter Strong said while bigger business would be able to hang on, smaller businesses were doing it tough.

“They will be looking long and hard as to whether they can carry on,” he said.

Mr Strong said while parts of the economy were booming, the small end of town was struggling with the two-speed economy.

“I don’t know what the RBA was thinking by increasing the rate,” he said.

Mr Strong said he agreed with the Australian Retailers’ Association assessment of the RBA as a “Grinch” stealing Christmas.

He said many small businesses were retailers facing high rents and were likely to be hit by a drop in discretionary spending.

ARA executive director Russell Zimmerman said retailers desperately needed a freeze on interest rate rises in the lead-up to Christmas.

This would give retailers a chance to recoup over a year of slow trade during the end-of-year holidays.

“History tells us that when consumers have to deal with increased mortgage repayments in the few months before Christmas it has a disastrous impact on retail trade during the festive season,” he said.

CommSec chief economist Craig James described yesterday’s increase as “a body blow” for retailers, other consumer-driven businesses and the housing industry.

“Consumers remain super-cautious about spending, and the lift in rates will give people even more reason to stay away from the shopping malls, real estate offices and car yards,” Mr James said.

The rise came hours after a new survey blamed interest rate rises, a winding back of stimulus spending and uncertainty about the global economy for denting business confidence.

While the Australian Chamber of Commerce and Industry survey looked at all businesses, the small end of town was hardest hit.

The survey, in conjunction with the Commonwealth Bank, found the September-quarter indicators for all businesses, regardless of their size, either remained the same or deteriorated.

ACCI economic policy director Greg Hogan said the rise would hit many businesses, especially those in consumer-sensitive areas such as retail.

Real estate group Ray White said the decision was unnecessary.

“Jawboning about interest rates rising before Christmas has already had the intended impact of an actual rate rise,” chairman Brian White said.

“The anticipation alone of a rate rise has already had a significant impact on the residential property sector, with buyer interest restrained.”

Instead of listening to the pleas of retailers … the RBA is once again the Grinch who stole Christmas”

Story by Claire Heaney www.heraldsun.com.au

Tags: business, economy, interest rates, investment, property, research

View the original article here

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