AFGC calls for pre-Christmas rate cuts

Christmas is just around the corner and retailers are gearing up for their busiest period of the year.

Unfortunately, many struggling shop owners are likely to be disappointed, as a new study has indicated that spending levels are set to be down this year.

According to the Australian Food and Grocery Council (AFGC), public spending will grow by a modest 2.9 per cent in the December quarter.

This is way down on the ten-year average of five per cent and is also lower than the 3.7 per cent increase seen in the September quarter in 2012.

Leaders at the AFGC believe that lower interest rates may encourage Aussies to start using their credit cards more frequently in the build-up to the festive season.

"The Reserve Bank's (RBA) decision to cut interest rates over the last six months has helped boost retail trade conditions, but overall the broader economic backdrop is creating a soft retail environment heading into Christmas," commented Gary Dawson, chief executive officer at the AFGC.

"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."

The RBA reduced the national cash rate by 25 points at the start of October and many economists had predicted further readjustments before the turn of the year.

Sadly, new inflation figures released last week may have thrown a spanner in the works, as they showed that price pressures in the third quarter of 2012 were not as intense as first expected, the Wall Street Journal reports.

It will be interesting to see what action, if any, the RBA will take when its board members meet again in early November.

In the meantime, Aussies are likely to keep a close eye on their spending levels, with many households still harbouring huge concerns about the state of the global economy.

Credit card use in general has been falling of late, with a lot of people utilising debit cards instead because this allows them to maintain tighter control over their finances.

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