Australia Aug retail sales rise after rate cuts, tax rebates

Credit: REUTERS/DAVID GRAY

Australian retail sales climbed in August, marking their biggest rise in six months and suggesting that recent interest rate cuts and tax rebates were helping to lift consumer spending but only up to a point.

By Swati Pandey

SYDNEY, Oct 4 (Reuters) - Australian retail sales climbed in August, marking their biggest rise in six months and suggesting that recent interest rate cuts and tax rebates were helping to lift consumer spending but only up to a point.

Although the 0.4% increase followed a flat outcome in July and was the biggest monthly rise since February when it jumped 0.9%, it came in below analysts' expectations for a gain of 0.5%.

"While a welcome return to growth, so far retail sales have failed to show a material boost from the tax refunds that began flowing in July, suggesting consumer spending faces considerable headwinds," NAB economist Kaixin Owyong said in a note.

Separate figures on Thursday showed new car sales in Australia fell for an 18th consecutive month in September.

The Reserve Bank of Australia just this week chopped its benchmark rate to a record low 0.75% in a bid to revive employment growth, consumer spending and inflation.

Financial markets 0#YIB: imply a 50-50 chance of a fourth cut as soon as next month while the cash rate is seen at 0.5% by early next year. RBAWATCH

RBA Governor Philip Lowe has repeatedly said the main domestic uncertainty for policy is the outlook for consumption, with modest growth in household disposable income weighing on spending.

"For the RBA, these data confirm anecdotes from retailers (about) ongoing softness and suggests further stimulus is required to get consumer spending to lift," Owyong added.

Household consumption, which accounts for 57% of Australia's annual gross domestic product, has been under pressure from record-high debt, sluggish wage growth and subdued house prices.

(Reporting by Swati Pandey; Editing by Edwina Gibbs)

((swati.pandey@thomsonreuters.com; +61 2 9321 8166; Reuters Messaging: twitter.com/swatisays))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Reuters

Reuters, the news and media division of Thomson Reuters, is the world’s largest international multimedia news provider reaching more than one billion people every day. Reuters provides trusted business, financial, national, and international news to professionals via Thomson Reuters desktops, the world's media organizations, and directly to consumers at Reuters.com and via Reuters TV.

Learn More