But will the Reserve Bank hike Tuesday anyway?
We are weaning ourselves off billions of stimulus payments and feeling flat, as the Treasury said we would.
The latest retail sales figures trend growth slowing to almost nothing nationwide and turning negative in NSW. Building approval figures also released yesterday show nationwide trend growth slipping to its lowest point in a year with NSW approvals falling quickly.
It's to be expected with cheques of $900 and $950 no longer available to stimulate spending and the First Home Owners Boost of $7000 to $14,000 no longer available to simulate home sales.
The Treasury even put a number on what the slump would do the Australian economy this year - it expected it to slice one per cent or around $12 billion from our spending, all other things being equal.
It's hope is that all other things won't be equal... BHP last month secured a 55 per cent increase in coking coal prices from Japan. The world's biggest iron ore producer, Brazil's Vale this week won a 90 per cent increase.
Access Economics director Chris Richardson said this will not only mean bigger profits for companies such as BHP but eventually "for Harvey Norman and the Banks".
"The higher exchange rate should make it easier for us to spend and employ more people in retail, pushing up spending further. An improving share market should make us better able to borrow to lift spending. After a time this will boost the Budget."
But that's for the future. Right now retail sales are choppy, and with the stimulus cheques months behind us, unimpressive.
A spokesman for Treasurer Wayne Swan said yesterday the retail numbers showed it would be a "challenge" to maintain economic momentum now that the stimulus was being withdrawn.
Westpac economist Matthew Hassan said we were suffering a "long bumpy let down" from last year's billions of dollars in stimulus cheques.
"But even looking through this choppiness, the underlying trend in sales is decidedly weak," he said. "Monthly trend sales growth has fallen to just 0.1 per cent. This is very slow by retail standards - upturns usually see much stronger growth. Indeed, with the population growing at 2.1 per cent per year, it implies falling per capita sales."
ICAP Australia economist Adam Carr said he no longer expected the Reserve Bank to hike interest rates on Easter Tuesday.
"I can’t see Glenn Stevens fronting up on Sunrise, guitar in hand, explaining away an April rate hike after this data can you?," he said. "Not that his TV appearance was ever a message that they will tighten next week. I mean what central bank governor in their right mind would front up before a solid run of data and promise to hike before seeing that data? But whatever chance that there may have been for a hike next week, this has just about killed it."
TD Securities economist Annette Beacher said she now expected Tuesday's board meeting to be heated. "On one hand house prices are rising strongly and private sector borrowing is rising. On the other retail spending is flat and house building stalled. It's a close call."
Treasurer Swan told a Business Council dinner Monday the May Budget would be a "balancing act." He would have rein in spending growth while supporting economic growth.
Published in today's SMH and Age
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