Inflation figures released by the Office for Statistics last week showed that consumer prices continued to rise on essentials such as rent, insurance and education. Economists said this meant the likelihood of interest rate cuts in the near future was weak.
AMP deputy chief economist Diana Mousina said the figures showed consumer spending was clearly depressed.
“Today's retail data is not consistent with an economy that needs further tightening,” he said.
The retail spending data is the last key piece of information the Reserve Bank will receive ahead of next week's two-day council meeting.
KPMG chief economist Brendan Rynne said the figures would ease the council's concerns about demand in the economy, believing the council would hold interest rates steady at 4.35 percent.
“However, the RBA's path forward remains uncertain. It will closely monitor real economic activity, wage growth and headline inflation data over the coming months and any surprises could delay any potential rate cut rates, or even discuss further rate hikes again,” Rynne said.
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Australian Retailers Association chief executive Paul Zahra said cost of living pressures were making things difficult for retailers.
“As long as interest rates remain high, discretionary spending will suffer,” he said.
Despite the drop in consumer spending, home values have continued to rise as residential sales continue to outpace real estate listings.
National home values rose 0.6 percent in April, according to the latest figures from CoreLogic, the same pace of growth as in March and February and the 15th straight month of growth.
Home values have risen 11.1 percent, or $78,000, over the national median home value since they bottomed out in January of last year, with growth led by smaller capitals such as Perth and Brisbane.
Sydney house values continued to rise by 0.4 per cent on the month, while Melbourne values fell by 0.1 per cent in April.
CoreLogic estimated there were nearly 76,300 homes for sale in the four weeks to April 28, which is 17.6% below the previous five-year average, while the number of sales in April was 2.4% higher than the average of the previous five years. .
“Such a mismatch between available supply and demonstrated demand is keeping markets skewed in favor of sellers in most cities,” the report said.
