Gerry Harvey calls on RBA to cut interest rates to save Christmas

Retail veteran Gerry Harvey is pleading for the Reserve Bank to cut interest rates this afternoon, after the company released disappointing results for the September quarter during which profits fell by nearly 20%.

The announcement comes as a number of retailers have posted underwhelming sales results for the past few months, including JB Hi-Fi, with many urging the RBA to cut the official cash rate in order to boost sales.

The Australian Retailers Association yesterday said the only way retailers will be able to survive is if the official cash rate is cut.

“If a rate cut does not come through, Christmas will be ordinary,” Harvey told the Australian Financial Review.

“Today was a bad day for Harvey Norman with a 20% fall in profit. The country needs some good news and kick-along because there is so much negativity.”

Harvey Norman announced comparable store sales fell by 3.8% across the company’s global operations, and were down 2.8% in Australia only. It blames the strength of the Australian dollar, higher competition, and retail gross profit margins, all of which have reduced franchise fees as well.

“This is nothing new,” Harvey said. “It’s the collapse of the TV and audio-visual market.”

Prices for flat-screen televisions have been dropping dramatically, erasing margins for electronics retailers, such as Dick Smith and JB Hi-Fi. Harvey also noted that the closure of four Clive Peeters stores negatively affected the end of year result.

Retailers’ cries for interest rate relief have been echoed by the industry’s peak body, whose executive director Russell Zimmerman says it is imperative the RBA cuts rates.

“Retailers are racing towards the festive season with uncertainty over cashflow, staffing levels and trade growth, they need a rate cut to help save Christmas trade,” he says.

“If retailers can’t bet on an interest rate cut to put more cash into consumers’ pockets and bring Christmas shopping to more predictable levels, the implications will resonate across the industry and ultimately impact more widely on employment, business sustainability and further innovation.”

Official inflation figures released last week, along with a private gauge of inflation released yesterday, were lower than expected. Economists believe this will give the RBA scope to cut rates today.