Wayne Cole reports from Sydney that Australian retail sales witnessed a slight downturn in December, following a robust shopping spree during Black Friday in November. However, thanks to widespread discounts, retailers managed to contribute significantly to the economic growth over the entire fourth quarter.
According to the Australian Bureau of Statistics (ABS) data released on Monday, retail sales took a minor hit of 0.1% in December, a decline from the 0.7% rise experienced in November. This result was more resilient than analysts had predicted, who expected a steeper 0.7% drop. The absence of a significant decline was partly due to Cyber Monday deals, which occurred in December, spreading sales across the month.
Robert Ewing, leading the business statistics unit at ABS, noted that “Cyber Monday prompted increased spending on household goods as consumers capitalized on lucrative discounts on high-value items.”
For the fourth quarter, retail sales grew by a substantial 1.0% in real terms, reaching A$105.8 billion (about $64.93 billion). This growth surpassed the forecasted 0.8% and marked the most significant increase since early 2022. Generous discounting encouraged families to make use of the billions in government tax cuts and subsidies provided during the latter half of the year.
This consumer spending boost is expected to add around 0.2 percentage points to the gross domestic product, marking a crucial, albeit modest, advancement as the economy battles the weight of high mortgage rates and increasing living costs.
There’s hope for those grappling with borrowing costs, as market speculations strongly suggest the Reserve Bank of Australia is poised to implement its first rate cut in four years on February 18. Futures markets are indicating a 95% likelihood of a 25-basis-point reduction from the 4.35% cash rate, with expectations of two reductions anticipated by the end of the year.
The central bank had hinted at this possibility back in December, and the recent softer-than-expected inflation report has seemingly paved the way for a rate adjustment. Luci Ellis, Westpac’s chief economist, stated, “The faster-than-expected disinflation gives the RBA the confidence needed to commence the rate-cutting cycle.” She further explained, “We anticipate the RBA will remain dependent on the data and won’t rush into further moves. Assuming inflation continues to fall and the labor market softens, we expect further cuts in May, August, and November, with a terminal rate reaching 3.35%.”
Further supporting the call for an interest rate reduction is the potential threat to global trade posed by U.S. President Donald Trump’s tariffs on countries like China, Mexico, and Canada. As a significant exporter of resources to China, Australia stands to feel the effects if these tariffs hinder growth in China and its demand for commodities.
In response, the Aussie dollar took a hit, dropping 1.6% to reach its lowest value since the 2020 pandemic, now sitting at $0.6115.
($1 equals 1.6295 Australian dollars)
(Reported by Wayne Cole; Edited by Kim Coghill and Christian Schmollinger)
