‘Path forward remains uncertain’: Spending slumps before RBA’s pre-budget rates call

Inflation figures released by the Bureau of Statistics last week showed consumer prices were continuing to rise in essentials including rent, insurance and education. Economists said that meant the likelihood of interest rate cuts in the near future was dim.

AMP deputy chief economist Diana Mousina said the figures showed consumer spending was clearly depressed.

“Today’s retail data is not consistent with an economy that needs further tightening,” she said.

The retail spending data is the last key piece of information the Reserve Bank will receive before its two-day board meeting next week.

KPMG chief economist Brendan Rynne said the figures would ease the board’s concerns about demand in the economy, believing the board would hold interest rates steady at 4.35 per cent.

“However, the RBA’s path forward remains uncertain. It will be closely monitoring real economic activity, wage growth and overall inflation data in the coming months and any surprises could delay any potential rate cuts, or even bring discussions of further rate hikes back to the table,” Rynne said.

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Australian Retailers Association chief executive Paul Zahra said ongoing cost-of-living pressures were making things tough for retailers.

“Whilst interest rates remain elevated, discretionary spending will suffer,” he said.

Despite the fall in consumer spending, home values have continued to rise as residential sales continue to outstrip property listings.

National home values rose by 0.6 per cent in April, according to the latest CoreLogic figures, the same pace of growth as March and February and the 15th consecutive month of growth.

Home values are up by 11.1 per cent, or $78,000 on the country’s median home value, since they bottomed out in January last year, with growth led by smaller capital cities such as Perth and Brisbane.

Sydney’s home values have continued to rise by about 0.4 per cent a month, while in Melbourne values fell by 0.1 per cent in April.

CoreLogic estimated there were nearly 76,300 homes listed for sale in the four weeks to April 28, which is 17.6 per cent below the previous five-year average, while the number of sales in April was 2.4 per cent higher than the previous five-year average.

“Such a mismatch between available supply and demonstrated demand is keeping markets skewed in favour of sellers in most cities,” the report said.