Rising consumer confidence, income tax cuts and now a modest interest rate cut should give a boost to retail spending.
Figures due on Wednesday will suggest the industry needs it.
The Reserve Bank of Australia cut the cash rate to a record low 0.1 per cent from 0.25 per cent at Tuesday’s monthly board meeting, along with a reduction in rates for its growing arsenal of monetary policy levers.
If the cash rate cut is passed on in full by the retail banks, the average monthly saving could be around $33 on a $400,000 loan for an owner occupier paying principal and interest.
Treasurer Josh Frydenberg has told the banks to pass on the reduction to its customers.
The rate cut, the first since March, comes just week’s after the federal parliament passed the personal income tax cuts contained in the budget.
Against this backdrop, consumer confidence – a pointer to future household spending – has risen for nine straight weeks and now stands at an eight month high.
However, the extra cash in people’s pocket has yet to translate into spending at the shops.
The Australian Bureau of Statistics will release its final retail spending figures for September on Wednesday.
Preliminary figures released last month showed spending fell by $448.6 million, or 1.5 per cent, which followed a four per cent drop in August.
Job security will be a factor in getting people to part with their money and a key factor behind the Reserve Bank’s rate decision.
“With Australia facing a period of high unemployment, the Reserve Bank is committed to doing what it can to support the creation of jobs,” Reserve Bank governor Philip Lowe said.
The ABS will also release its weekly payrolls data, a special series to give a more frequent update on the labour market during the pandemic.