Today’s interest rates rise of 0.25 per cent to an 11-year high of 6.75 per cent won’t affect the retail economy too much as consumers have become immune to the phenomenon, say Australian electrical retailers despite analyst reports to the contrary.

Australians have been confronted with 10 rate rises in the last five years, with two in the last four months, but rates still aren’t high enough to alarm consumers, says JB Hi-Fi managing director, Richard Uechtritz.

“Today’s rate rise might take some money out of the economy, but it will be a relatively small amount. There has been a lot of commentary saying it will affect expenditure big time, but the last five interest rate rises haven’t affected consumer spend at all,” Uechtritz told SmartHouse News.

In fact, all major Australian electrical and appliance retailers, including JB Hi-Fi, Retravision and Harvey Norman, have recently posted their strongest earnings in years, with JB Hi-Fi’s revenue increasing 36 per cent to $1.3 billion for the 2007 financial year, and Harvey Norman’s expected to rise up to 28 per cent for the 2008 financial year.

“We’ve just experienced our strongest sales in years. Will another 0.25 per cent make a difference? I don’t think so. Rates are still relatively low – they might be higher than a decade ago, but they’re still low,” said Uechtritz.

According to the retailer, the electrical industry won’t be hit hard mainly because of the sorts of products it sells – products that market commentary has previously stated are ‘leisure items’.

“Rate rises don’t affect companies in our sector, because we have goods that people want. They won’t give up buying their plasma TV or their iPod just because rates have risen,” Uechtritz said.

Kay Spencer, the managing director of electrical and appliance buying group, Narta, which serves retailers such as Bing Lee, Clive Peeters and Bi-Rite, agrees that the industry won’t be negatively affected in the lead-up to Christmas.

“I think the impact will hit harder in the New Year. It may also depend on change of government,” she told SmartHouse News.

Uechtritz however is confident that the forthcoming election won’t impact consumer spending in his sector, even due to fear of change of government.

“Last time Labour was in power they were quite conservative – they have to be middle-of-the-road to attract voters. There isn’t too much of a concern for electrical retailers, as people quite comfortable, and if the government changes, people will remain comfortable – their policies aren’t too dissimilar so there isn’t any consumer fear,” he said.

Representatives in the financial sector however are forecasting a different outcome, saying that six interest rate rises since 2004, including two in the past four months, is enough to make the average consumer uncomfortable, as far as borrowing money for home loans is concerned.

“This is the second rate rises in quick succession and people are thinking there might be more, so I think this rate rises may have a breaking impact on people’s willingness to borrow,” a Citigroup economist, Paul Brennan, told News.com.au

“I think it may shock people a little bit because there is a general perception out there that interest rates don’t rise during an election year, but they have, just before a federal election (due on November 24).”