Wesfarmers Ltd. Managing Director Richard Goyder called on the Reserve Bank of Australia to cut interest rates at its next meeting on May 1 to help a retail industry struggling with declining consumer confidence.
The head of Australia’s second-largest retailer told Australian Broadcasting Corp. television that a cut of as much as 0.5 percentage point would be “helpful for a number of sectors.” The RBA has kept rates on hold since two successive cuts in November and December brought key borrowing costs to 4.25 percent, still the highest among developed economies.
Swaps indicate Stevens will trim the overnight cash-rate target by more than a percentage point within a year, and 16 of 28 analysts surveyed by Bloomberg expect Australia’s interest rates to drop to 3.75 percent in the next two months.
“There’s a distinct lack of confidence here,” Goyder said in a transcript of the interview. “A rate cut would be good in terms of getting positive consumer sentiment.” While a cut of 0.5 percentage point would have more impact, Goyder said he “wouldn’t bet my house” on it happening.
Australia’s A$240 billion retail industry is suffering from consumer confidence that has fallen for seven out of the past nine months. Wesfarmers on April 24 reported sales from its Target department store chain fell 4.4 percent from a year earlier in the March quarter, while those from its budget department store KMart rose just 1.2 percent.
While Australia’s economy is driven by a mining boom spurred by demand from China and India for iron ore, coal and liquefied natural gas, the retail, tourism and manufacturing industries have weakened under a local currency that has risen 44 percent in the past three years.
Wesfarmers also owns chemicals companies, coal mines and an insurer. Goyder said that he expects “more upward pressure on prices rather than downward pressure” in the near term.
The price of thermal coal futures at Australia’s Newcastle port dropped 22 percent over the past year, hitting an 18-month low April 25.
Goyder said he would be prepared to sell the company’s coal mining assets -- the Curragh steel-making coal mine in Queensland state and a stake in the Bengalla mine in New South Wales state -- at the right price.
“If someone walks in the door with an offer that’s attractive we’ll look at it,” he said.