A reluctance to spend due to squeezed household balance sheets should keep the Reserve Bank firmly on the sidelines. Figures on Tuesday confirm consumers are still trimming their spending, especially on non-essentials such as fashion, in the face of elevated borrowing costs and rising rent, insurance and other hard-to-avoid expenses. Sluggish retail sales bodes well for the Reserve Bank’s bid to slow the economy and bring down inflation which, at 3.
6 per cent, remains above the two-three per cent target range. AMP Australia economist My Bui said the central bank should not be discussing the need for another rate hike at its next meeting in June when spending was so weak. She said demand was clearly slowing, meaning consumers were responding to higher interest rates by consuming less, taking pressure off prices.
“The lower inflation backdrop, soft economic growth and higher unemployment rate should allow the Reserve Bank to start cutting interest rates by the end of the year,” she wrote in a note. A lacklustre 0.1 per cent lift in retail sales was recorded in April, the Australian Bureau of Statistic said, which was a touch below expectations and not nearly enough to unwind a 0.
4 per cent fall in March. Year-on-year, retail trade increased a disappointing 1.3 per cent.
On a per person basis and when adjusting for inflation, retail sales is in decline. The April data pointed to less spending on non-essentials with clothing, footwear, and personal accessory retailing sinki.
