Consumer spending bounce back takes pressure off RBA to cut rates

“Their [the RBA’s] concerns have really been centred on household spending and the impact from falling house prices, as well as ongoing low wage growth, so I think they will be a little bit relieved to see this pick up,” she said.

“The growth is OK – it’s not spectacular – but it does suggest consumers are still out there, they’re still spending, they haven’t disappeared altogether.”

The growth is OK – it’s not spectacular – but it does suggest consumers are still out there, they’re still spending,

ANZ’s Felicity Emmet

BIS Oxford Economics chief Australian economist Sarah Hunter said the retail numbers were due to bounce back after weak results in December (-0.4 per cent) and January (0.1 per cent), which had been thrown out by the increasing popularity of November’s “Black Friday” promotions that pulled forward sales from Christmas and Boxing Day.

“If we hadn’t have had a bounce back, and we got another weak month, that would have been very worrying,” she said.

“If you average things out, it looks like things are trucking along as they were at the end of last year. But it doesn’t look like it’s deteriorated, which is the key takeaway.”


The retailers themselves are tipped to be licking their lips at the prospect that tax cuts of up to $2160 for some families unveiled in Tuesday’s federal budget, and the expansion the instant asset write-off scheme for small businesses from $25,000 to $30,000, will lead to a bump in sales.

Macquarie analysts said the tax-write offs would spur investment in new IT equipment, furniture and other office equipment at the likes of Harvey Norman, JB Hi-Fi and Officeworks.

Despite that, JB Hi-Fi and Harvey Norman’s shares both sank as much as 4.5 per cent on Wednesday, after each rising about 8 per cent in the month leading up to Tuesday’s budget.

Citi analyst Craig Woolford said listed retailers’ shares had rallied partly in anticipation of budget tax cuts, and would struggle to move further “given the lack of significant surprises in the budget”.

Mr Woolford said the tax cuts could boost retail spending by 1 to 1.5 per cent in the September quarter, when payments start landing in bank accounts.

But that boost had to be viewed against the backdrop of households increasing their level of savings and the government lowering its forecasts for GDP growth and consumer spending, he said.

Meanwhile, car sales have slowed for the third consecutive month this year, with the peak industry body reporting a 7.1 per cent overall sales decrease in March over the same period in 2018. Sales dropped by 9.3 per cent in February and 7.4 per cent in January compared to the previous year.

“This is not surprising given the number of economic headwinds in the Australian market,” said Tony Weber, chief executive of the Federal Chamber of Automotive Industries.

Natassia is a journalist for The Sydney Morning Herald.

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