Article by AlgosysFx
Recent rate cuts by the Reserve Bank of Australia (RBA) have boosted retail sales in June, matching the biggest advance since April of 2011. With exports falling for the first time in four months, the nation’s economic growth is increasingly becoming more reliant on domestic demand. In June, Australian retail sales climbed by 1 percent, when it rose by a revised reading of 0.8 percent in the month before, data from the Australian Bureau of Statistics showed. This surpassed economic forecasts of a gain of 0.3 percent.
RBA Governor Glenn Stevens kept the benchmark interest rate at 3.5 percent in May and June, saying that it would shore up the strongest developed economy as a slowdown in economic growth already hit countries from India to Germany. Economists say that the report provides vindication for the central bank as it suggests that strong sales are being generated without stoking inflation. Aside from the rate cuts, cash handouts and sharply lower petrol prices boosted consumer spending during the month.
Shoppers were said to have splurged on cosmetics and pharmaceutical goods, after receiving carbon tax compensation and SchoolKids Bonuses, along with said interest rate cuts. The first half of this year has been deemed to be stronger than what was expected for retail sales. Ben Jarman, JPMorgan Economist said that retail sales, making up a big part of GDP, could trigger the RBA to revise its growth forecast for the Australian economy. “Australia’s stellar 4.3 per cent growth rate over the year to March shocked everyone and the bank had been to inclined to see it as an aberration. The pattern of retail spending is similar to what occurred following the large Rudd government stimulus payments back in 2008 and 2009, although the magnitudes were larger then,” he said.
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