AUSTRALIAN consumer spending power has also been underpinned by falling mortgage rates.
The Reserve Bank of Australia (RBA) cut its key cash rate by 100 basis points to a record low of 3.25 per cent on Tuesday, taking total cuts since September to a hefty 4 percentage points.
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SYDNEY - AUSTRALIAN retail sales surged in December as government hand-outs, lower borrowing costs and falling petrol prices boosted household spending power, providing vital support to an economy teetering on the brink of recession.
The 3.8 per cent jump in seasonally adjusted sales was the biggest in over eight years and far above median forecasts of a 1.4 per cent increase, data showed on Wednesday.
'When people are given big piles of money some of it is going to end up in electronics and household goods and department stores,' said Stephen Walters, chief economist at JPMorgan. Sales at department stores climbed 8.3 per cent in December, while spending on household good jumped 9.9 per cent and clothing 5.8 per cent. The Australian dollar initially edged higher after the data, but quickly faded. It ros to $0.6516 before backing off to $0.6480 by 0241 GMT (10.41am Singapore time). Debt markets were weak, focusing more on a fall in US Treasuries. Analysts suspected retail sales would sag in January and February as the impact of the one-off payments faded, but December's strength still meant that the fourth quarter looked better than before. 'It means retail sales were strong for the whole quarter and, as they make up 25 per cent of gross domestic product (GDP), provided a very good cushion for the economy,' said Brian Redican, a senior economist at Macquarie. The boost was timely as the A$1 trillion economy grew by a bare 0.1 per cent in the third quarter and there has been much speculation it shrank in the fourth, like many other developed countries. That would have put it on the path to recession, commonly described as two consecutive quarters of GDP declines. Prime Minster Kevin Rudd this week swore to 'move heaven and earth' to avoid recession. To that end, the government on Tuesday announced a second package of fiscal stimulus worth A$42 billion. Of that, around A$2.7 billion in cash payments would be made in March and another A$8.3 billion in April. The latest package took to A$78 billion the total stimulus spending announced since last September. -- REUTERS
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