03 February 2025, 8:00 PM
The likelihood of the Reserve Bank of Australia (RBA) announcing an interest rate cut at the next meeting in two weeks (Tuesday, February 18) is above 90% as underlying inflation sits at 2.7%, near the mid-point of the RBA's 2-3% range, and the big four banks confident of a positive result.In Lismore and the Northern Rivers, a 0.25 basis point reduction would mean an owner/occupier paying principal and interest on a $500,000 mortgage on the average variable rate of 6.33 per cent over 25 years would pay $77 less each month.While that amount looks small, it is more money in the pockets of families. That amount may double if further interest rate decreases occur in the next three months.Will that lead to our local businesses benefitting from an increase in-store visits and purchases?The Lismore App approached owners and managers across varied sectors to gauge their response.Alan Magnay from AJ Magnay's Building Materials and Hardware on Macaulay Street, North Lismore, joked, "Absolutely, they'll be swarming in here in droves," but then went on, "I don't think it's going to make that much difference at the end of the day until interest rates have considerable drops, or consecutive drops."Two, maybe three, will be needed so people feel safe and have more dollars in their pocket. Just about every industry I talked to is struggling at the moment, especially hospitality. They're really struggling to try and get people through the door."Me and Anna went out the other day, it was $100 for the pair of us, and we had two main meals, an entree and a drink each. That's 100 bucks. You might do that once a month or something."I can see where they're coming from with their prices. They've got to lift the prices because everything else has gone up. The wages have gone up, insurance has gone up and turnovers down. How else do you get enough money to keep going?"I think the interest rate decrease will put a bit of confidence back into the market."Ethan Lim from Uncle Lim's Chinese Restaurant on Keen Street told the Lismore App his business has not really been effected."We have had consistent customers in the last twelve months. Sure, we are not sold out every night, but we do have people dining with us or doing takeaway.""I don't think a drop in interest rates will affect our restaurant very much."Matthew Healy from Daleys Homewares & Monogramming shares Alan's opinion."I'm not sure that it will have a dramatic impact on people. People are stressed at the moment, so I'm actually expecting people to just be a little bit more relaxed about things. So it's more a sigh of relief rather than opening their wallets.I think it's incredibly unlikely there'll be a second one before May. Easter is in the road. That's not really likely in the schedule of the Reserve Bank meetings. So, it'd have to be a fairly dramatic change in the economy for the reserve to take something so out of character.Matt thinks the federal election, which has to happen before the middle of May, will have a negative impact on business until June."I think in the lead-up to a federal election, people are going to start shutting down again. People usually stop spending in the lead-up to an election. So assuming there's a rate cut in a couple of weeks' time, and assuming there's a clear outcome on the election, I think we won't have any sort of real recovery until probably June or even into the next financial year.Deb Ray from Music Bizarre on Magellan Street saw more of the same thinking."On my business, it's not really going to affect me. It's going to affect me on my home loan, but my mortgage on this building is to my mum, so she's not going to be changing her rates."I think (the rate drop) will be great. I mean, they've been talking we'll maybe get a rate cut, and it would be really fabulous to see it. I think that the Labor government have done a brilliant job of keeping inflation down, getting it to go down. I think they've done incredibly well with their cost of living strategies that they've used, and I think that has been a real and very significant change for people, particularly on lower incomes. So I hope to see that reflected in mortgages, house mortgages and rents and stuff like that too. It'd be nice to see them actually drop the rate.As for how many rate drops it would take to see an upturn in her business?"Oh, goodness knows. For a long time, I've thought that people don't have much money around here. You need to have things that are really reasonably priced. And then someone comes in with amazing vintage clothing for hundreds of dollars, and teenagers buy it without blinking. And I'm like, Oh, really. It's all perception. The perception of value in things and what people value."Obviously, the younger generations have grown up with all the chain stores having the same stuff. So if you've got something that's in good condition from the 70s or even the 90s, they call it vintage now, which is funny for an oldie like me, but they want that because it's different. It's completely unique. And so the value, and how much people will part with for various things, is always a bit of a mystery and a bit random to me."Elton Cummings, owner of Bi-Rite Home Appliances and Furniture Court Lismore, said the home appliance part of the business has been strong, while the furniture side could have performed better."If your washing machine breaks down or your TV stops working, people will replace it straight away. However, if it's a bed or a lounge, they are items that can be purchased later."I think a drop in interest rates will give people confidence, but it won't necessarily lead to people spending more money straight away. We would need two or three rate drops to see a change in spending habits. Plus, we have a federal election coming up, and that makes people uncertain."Mayumi Okamura from Paul Meccanico on Keen Street said she doesn't think an interest rate cut will make any difference to her store."The look of the CBD isn't good; it hasn't bounced back from the flood. Beautifying the CBD would lead to more foot traffic and more items being sold."While a reduction in interest rates of 0.25% will benefit households, the consensus was that will not flow through to the tills for Lismore retailers and hospitality.