Tuesday, November 18, 2008
The Bureau of Statistics reports that trend spending has been flat in real terms since July, with Victorians spending no more than was needed to keep pace with inflation since then. This is despite tax cuts delivered that month that boosted average pay packets by around $20 per week.
NSW is the only state whose retail sector has performed worse than Victoria's with spending there sliding 1.1% since July. Nationwide, real retail spending slipped 0.1% in trend terms for the second successive quarter.
"It's an outcome that until recently the Reserve Bank was trying to achieve," said Commonwealth Bank economist James McIntyre. "Since then policy has turned on a dime, but monetary policy operates with a lag..
Spending on big ticket items and luxuries has nosedived...
Spending on recreational goods such as sporting and photographic equipment is down 11.8% over the year in real terms, its biggest dive in 25 years. Spending on cafes and restaurants is down 9.3%.
Westpac economist Bill Evans revised his economic growth forecast as a result of the news. He now expects zero or slightly negative growth when the June quarter figures are released in a fortnight's time.
Financial markets are now pricing a 94% probability of an interest rate cut of 1.00 complete percentage points when the Reserve Bank board next meets to consider rates on December 2.