Weak retail figures put pressure on RBA
Market watch top headlines
SYDNEY, Dec 3 AAP
December 03 2012, 2:59PM
The Reserve Bank of Australia (RBA) is under pressure to drop the Grinch's outfit and spread some Christmas cheer after official figures showed consumers are keeping their wallets and purses firmly shut.
Struggling retailers called on the RBA to cut the cash rate at its monthly board meeting on Tuesday after figures released by the Australian Bureau of Statistics (ABS) showed retail spending remained stagnant in October.
Australian Retailers Association executive director Russell Zimmerman said consumers were reining in spending to deal with rising cost of living pressures and a rate cut was needed to boost confidence.
"A rate cut tomorrow might be just what consumers need to be able to get out there and start their Christmas shopping," he said after the ABS data was released on Monday.
"In fact, retailers are now relying on any consumer relief in order to save the silly season."
Futures markets currently put the chance of a 0.25 percentage point rate cut in December at about 90 per cent.
The RBA has cut the cash rate by 1.5 percentage points since November 2011.
But it kept it on hold at 3.25 per cent in November and some economists believe the central bank has moved too slowly to stimulate a weakening economy.
Market Economics managing director and former Gillard government advisor Stephen Koukoulas took to Twitter to criticise the central bank and call for a larger than normal rate cut on Tuesday.
"They have really misread things this year," he tweeted.
"RBA has only cut 25bps since June - despite hard evidence of below trend growth. Obviously it should go 50 (basis points or half a percentage point) tomorrow."
HSBC Australia chief economist Paul Bloxham said Monday's retail data made a rate cut more likely.
"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 ABS figures showed household goods retailers fared worst in October, with sales down 1.6 per cent, while cafes, restaurants and takeaway food services experienced a 0.3 per cent drop.
Department stores and clothing stores also saw their sales drop 0.1 per cent.
Food retailers were the only sub sector to record sales growth during the month, with spending up 0.9 per cent.
Conditions were worst in the Australian Capital Territory and Tasmania (down 2.2 per cent and 1.9 per cent respectively) and strongest in the Northern Territory and Western Australia (up 1.5 per cent and 0.9 per cent respectively).
By Evan Schwarten