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Australia’s retail sales figures for November have fallen short of expectations, raising the likelihood of an interest rate cut by the Reserve Bank of Australia (RBA) in February.
Despite the shopping rush typically associated with Black Friday and pre-Christmas promotions, sales rose by just 0.8%, below the forecasted 1% increase, according to the Australian Bureau of Statistics (ABS). This follows a revised 0.5% increase in October, reflecting ongoing caution among consumers.
Market reaction to the data was swift, with the Australian dollar weakening briefly. Money market pricing now indicates a more than 70% chance that the RBA will begin easing interest rates at its February meeting.
“The weaker-than-expected retail trade figure, combined with yesterday’s soft underlying inflation, reinforces our view for a February RBA rate cut,” said Carol Kong, currency strategist at Commonwealth Bank of Australia.
Retail sales are closely monitored by policymakers as household consumption accounts for over half of Australia’s gross domestic product. Year-on-year, retail sales rose by 3% in November, surpassing the 2.2% annual growth recorded the previous year. Gains were recorded across all major retail categories, with department stores leading the way at 1.8%, followed by clothing, food, and accessories at 1.6%, and cafes, restaurants, and takeaways at 1.5%.
While November marked the eighth consecutive month of sales growth, economists cautioned against interpreting this as a sign of full recovery.
“The retail outlook is not completely out of the woods yet. Keep in mind that these improvements were from a very low base. Overall, we take today’s data as relatively neutral in terms of implications for the RBA,” AMP economist My Bui said.
The RBA has kept interest rates at 4.35% since late last year – the highest in over a decade – as it monitors inflationary trends and the resilience of household spending. Minutes from the central bank’s December meeting revealed cautious optimism, with policymakers noting that inflation is moving toward target but stopping short of declaring the battle over.
The weaker retail performance also has political ramifications, with Prime Minister Anthony Albanese’s government facing pressure ahead of the federal election due by May 17. Rising cost-of-living concerns and high borrowing costs have weighed on the government’s popularity.
Moving forward, the ABS plans to cease publication of retail sales data from mid-2025, shifting instead to a more comprehensive monthly household consumption report. The first release of this new data is scheduled for Friday.
