Businessman Solomon Lew has urged the Reserve Bank of Australia to slash the official interest rate.
Lew’s call came after his company, Premier Investments, posted a 2.6% drop in profits.
“We do need an interest rate cut immediately,” Lew says. “I think the Australian economy is in trouble.”
Lew said there was a danger of job losses, with no new jobs being created across Australia’s eastern seaboard.
“It is completely frozen,” Lew says. “The only jobs that are being created are over in the west, basically, and that’s in the mining sector.
“I don’t see any growth in any other sector at this point in time and I see rising costs.”
Lew, a RBA board member from 1992 to 1997, says the RBA has mishandled the mining boom to the detriment of the non-mining sector – in particular, retail.
“I’d be calling on the Reserve Bank to cut 50 to 75 basis points at the next meeting. The Australian economy is in trouble, but as far as we are concerned we have loads of opportunities and we’re going to invest in Asia,” Lew says.
Premier Retail’s chief executive Mark McInnes, who ran David Jones from 2003 to 2010, has been closing the operation’s underperforming stores, cutting costs, ramping up online presence and is expanding its well-performing brands, including Smiggle and Peter Alexander, into Asia.
“It’s true that retailers in Australia are clearly facing a tough macro environment – weak consumer spending, increased competition, and rising rental and labour costs,” McInnes says. “These challenges will only continue to test the structure of the retail industry in Australia.”
Premier Retail posted a before-tax profit of $54.1 million for the first half of the 2012 financial year and will maintain an interim dividend of 18 cents.