Latest / Best of Business / Paul Bloxham: HSBC chief economist on Australia's retail sales rebounding after winter downturn

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Paul Bloxham: HSBC chief economist on Australia's retail sales rebounding after winter downturn · Best of Business

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  Speaker 2: News Talk said, but you ejected a twenty five to
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  Speaker 2: seven Australian retail sales have rebounded, so there are zero
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  Speaker 2: point seven percent, but expectations heading into the data release
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  Speaker 2: we're looking at about zero point four so twice as
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  Speaker 2: good as expectations. It's all being put down to a
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  Speaker 2: warm August. It follows growth of just zero point one
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  Speaker 2: percent in July. Paul Bloxham is HSBC's chief economist and
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  Speaker 2: his weathers this evening. Hi, Paul good a, So how
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  Speaker 2: has a warm August encouraged spending?
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  Speaker 3: Well, these numbers are seasonally adjusted, so strictly speaking, they
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  Speaker 3: should adjust for the fact that there are weather patterns,
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  Speaker 3: of course, but if you get an unusually unusual weather
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  Speaker 3: pattern and unusually warm months, for example, people might spend
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  Speaker 3: a bit on outdoor activity and so on. And that's
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  Speaker 3: what the ABS has really been pointing out in those numbers.
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  Speaker 3: But I don't think that's the key story. I think
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  Speaker 3: the key story here is that there has been tax relief.
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  Speaker 3: Tax cuts have come through, there's been cost of living
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  Speaker 3: relief as well, and household incomes in Australia have gotten
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  Speaker 3: a bit of a boost in July and into August,
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  Speaker 3: and people are starting to spend just a little bit
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  Speaker 3: of that. They're saving some of it, but they're spending
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  Speaker 3: some of it. So I think part of the lift
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  Speaker 3: in the consumer spend, which we're expecting actually will continue
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  Speaker 3: in the coming months and is going to be a
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  Speaker 3: feature of this second half of this year for Australia
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  Speaker 3: is about that relief, is about more income coming their way.
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  Speaker 3: The challenge there, of course, is if demand picks up
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  Speaker 3: in the economy, you get a bit more consumer demand
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  Speaker 3: at a time when inflation is still not as low
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  Speaker 3: as it needs to be, then it means the RBA
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  Speaker 3: isn't able to cut interest rates. So while it's a
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  Speaker 3: positive story because the consumer spending a bit more, it
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  Speaker 3: means that rape relief is still quite a distance away.
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  Speaker 2: Yeah, it talk to us a bit more about that.
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  Speaker 2: What do you think it means for the inflationary.
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  Speaker 3: Outlod Well, we think inflation is going to prove to
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  Speaker 3: be sticky in Australia. We've been saying this all year long. Actually,
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  Speaker 3: we don't think the RBA is going to be cutting
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  Speaker 3: interest rates this year, and we thought that the rate
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  Speaker 3: cuts are probably not coming through till twenty twenty five,
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  Speaker 3: and that's been out of view fly and the numbers
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  Speaker 3: are playing out that way. So it's a combination of
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  Speaker 3: two things. It's both the demand is still holding up,
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  Speaker 3: as we talked about consumers starting to spend a little
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  Speaker 3: bit more because there's a bit more fiscal stimulus coming through.
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  Speaker 3: But the primary thing is that the supply side of
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  Speaker 3: Australia's economy is really quite poor. It's really quite weak.
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  Speaker 3: We've seen productivity that's been quite weak as well, So
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  Speaker 3: that combination is leaving us with a cost space that's
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  Speaker 3: running a bit too quickly and sticky inflation. The RBA
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  Speaker 3: isn't I don't think then. I don't think they're going
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  Speaker 3: to be able to cut interest rates until well into
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  Speaker 3: twenty twenty five.
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  Speaker 2: That's interesting. So what are you making of the chances
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  Speaker 2: of a big cut to the cash right here next week?
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  Speaker 3: Well, I think there are options here. I think the
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  Speaker 3: RBNZ is going to cut and I guess there are
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  Speaker 3: options to cut twenty five or cut fifty, and we'll
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  Speaker 3: have to see what they decide to do. I mean
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  Speaker 3: keep in mind, it was, you know, back in August
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  Speaker 3: when they cut, they'd told us in May, just in
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  Speaker 3: May prior to that, that they didn't think they were
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  Speaker 3: cutting until well into next year, and they thought there
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  Speaker 3: was a possibility it might lift break from some one.
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  Speaker 3: It's actually really quite differ thought to read the RBNZ
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  Speaker 3: at the moment in terms of the way they are
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  Speaker 3: likely to respond to the data. But what we know
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  Speaker 3: is the economy is week, GDP is week, growth is week,
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  Speaker 3: and we know there are science and inflation's coming down too.
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  Speaker 3: So I think we can fairly confidently say the rbnz's
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  Speaker 3: going to deliver another cut next week.
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  Speaker 2: Yeah right, I can't. But twenty five point fifty basis
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  Speaker 2: points anyone's guess at.
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  Speaker 1: The stage, it's tricky.
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  Speaker 3: It's difficult to know because, as I say, they it
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  Speaker 3: hasn't been that clear exactly what data they're following in
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  Speaker 3: terms of how they're reacting.
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  Speaker 2: Okay, Hey, thanks for time, Paul, appreciate it as always,
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  Speaker 2: HSBC Chief Economist.
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