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Rate cut likely after weak retail sales

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AAP

2012-12-03

A December interest rate cut is looking more likely after official figures showed retail spending remained flat in October.

Figures released by the Australian Bureau of Statistics on Monday showed retail spending was steady in October, below expectations of a 0.4 per cent rise.

HSBC Australia chief economist Paul Bloxham said the figures meant it was more likely the Reserve Bank of Australia would cut the cash rate at its December board meeting on Tuesday.

"The steady retail numbers give the RBA more motivation to cut interest rates tomorrow to provide a bit of support ahead of Christmas," he said.

The RBA kept the cash rate on hold at 3.25 per cent in November.

Mr Bloxham said other ABS data released on Monday showed company profits fell 2.9 per cent in the September quarter, seasonally adjusted, while estimated business inventories, in seasonally adjusted chain volume terms, rose 1.1 per cent over the same period.

He said those figures suggested national accounts figures released by the ABS on Wednesday would show a modest increase in Gross Domestic Product over the September quarter.

"This suggests that GDP when we see it on Wednesday is probably going to be a positive but modest number so there is little really standing in the way of the RBA (cutting the cash rate)."