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Matthew Hassan, analyst at Westpac, points out that Australia’s August retail update showed sales up 0.4% in the month and while this was broadly in line with the consensus forecast of a 0.5% gain it is a disappointing result given the scale of the policy stimulus boost to disposable incomes.

Key Quotes

“The combined effect of income tax offset refunds and interest rate cuts is estimated to be adding around $16.6bn to household disposable incomes over the year to June 2020. Even allowing for a delayed response and a low pass-through to spending, August should have started to see a meaningful lift in spending. As it stands, the 0.4% gain suggests the ‘cash splash’ is barely a trickle so far.”

“Overall this is a disappointing result suggesting that the stimulus cash has not been deployed and/or underlying conditions may be weaker than estimated (i.e. stimulus effects may have prevented an outright sales decline). Either way it marks a softer than expected trajectory for the consumer so far in Q3.”