Monthly consumer spending breached the $22 billion mark for the first time as confidence continues to build since the federal election and a new coalition government.
However, one business group has warned the post-election euphoria may quickly evaporate if the Labor opposition damages the government’s plans to repeal its carbon pricing laws.
New data showed retail spending ballooned to $22.1 billion in September, 0.8 per cent higher than August and double the expectation of financial markets.
Retail trade volumes also rose by a stronger-than-expected 0.7 per cent in the September quarter, creating a handy contribution to growth in the third quarter.
“Consumers have now started taking their wallets out of their pockets,” Treasurer Joe Hockey said.
The numbers cement expectations the Reserve Bank of Australia (RBA) will leave the cash interest rate unchanged at an all-time low of 2.5 per cent when its board meets on Tuesday.
However, Australian Chamber of Commerce and Industry (ACCI) acting chief economist Burchell Wilson said non-mining investment remains quite weak and unless there is a pick up, the central bank may have to cut the cash rate early in 2014.
Other figures released on Monday show inflation remained contained, while demand for workers was still subdued – indicating the labour market was operating a long way from full employment.
“There is certainly scope for another rate cut,” Mr Wilson said.
The TD Securities-Melbourne Institute monthly inflation gauge rose 0.1 per cent in October to an annual rate of 2.1 per cent, which was at the bottom end of the RBA’s two to three per cent target.
Meanwhile, ANZ job advertisements data showed a 0.1 per cent fall in October and a 12 per cent decline from a year earlier.
ACCI’s business expectations survey for the September quarter showed its general business conditions index mired at 42.8 points, well below the 50-point mark that separates expansion from contraction.
However, expectations for the December quarter rose to 53.2 index points.
“What we are failing to see at the moment is an improvement in expectations translating into an improvement in actual trading conditions,” Mr Wilson said.
“Given that improvement in sentiment is so fragile, the decision of the opposition to oppose the repeal of the carbon tax is a threat to that improvement in sentiment.”
The Labor opposition announced last week it would only support repealing the carbon tax if the government moved to an emissions trading scheme rather than implement its so-called direct action plan, which relies on carbon abatement measure such as tree planting to cut greenhouse gas emissions.
Still, the banking sector continues to go from strength to strength.
Westpac – the last of the big four banks to report its latest results – announced an eight per cent rise in full-year profit to $7.1 billion.
Australian Bankers’ Association chief executive Steven Munchenberg said the sector is an important contributor to economic activity and growth, paying out a record $21.2 billion in dividends this year and $12.1 billion in tax to the federal government.