Much to the surprise of all the analysts, retail sales in Australia fell to it’s lowest level in four months in December. December is traditionally the biggest retail month of the year and this definitely was not the case this year prompting concern.
Over the last few months of 2012, the reserve back has gone through a series of rate cuts to encourage consumer spending and confidence. This has not worked, however, and many people are still not willing to spend. In fact, sales in December were down 0.2% from November. The expectation of economists was a rise of 0.5 percent.
On news of the poor retail result, the Australian dollar dived and stayed down. This poor performance from the retail sector signals that the Reserve Bank may have to continue it’s policy of interest rate cuts. The Reserve Bank has cut interest rates by 1.75 percent since November 2011. The RBA cash rate currently sits at 3% which is equal to what Australia had it at during the global financial crisis.