Growth in retail spending is expected to have slowed even before Australians feel the impact of the first official interest rate rise in more than a decade.
The Reserve Bank of Australia lifted the cash rate to 0.35 per cent from a record low 0.1 per cent following Tuesday’s monthly board meeting.
It was a larger increase than expected by economists after last week’s spike in inflation to the highest level in some two decades.
CBA was the first of the big four banks to hike its standard variable home loan rates, announcing on Tuesday it would pass on the full 0.25 percentage point increase.
ANZ and Westpac quickly followed suit, followed by National Australia Bank on Wednesday morning.
RBA governor Philip Lowe has warned further interest rate rises should be expected in coming months, because without them inflation would grow substantially.
The Australian Bureau of Statistics will release retail trade figures for March on Wednesday.
Economists’ forecasts point to a more modest 0.5 per cent increase in the month after two solid months of growth.
However, predictions for March range quite widely, from a one per cent fall to rise of two per cent.
Retail spending has shown solid momentum since the turn of the year despite the outbreak of the COVID-19 Omicron variant and floods along the east coast of Australia.
However, there are concerns that the spike in petrol prices to above $2 a litre at one stage during March will have strained household budgets.
The ABS will also release home lending figures for March, which economists expect will show a further two per cent decline as the housing market loses steam.
The CoreLogic national home value index for April released on Monday rose by just 0.6 per cent, the smallest rise since October 2020.
Stretched housing affordability, rising fixed-term mortgage rates and lower consumer sentiment have weighed on house prices after last year’s spike.
At the same time, the ABS will also issue its living costs indexes for the March quarter, which measure the price change for goods and services and the effect they have on living expenses for various household types.
Cost of living pressures are a likely key topic when Treasurer Josh Frydenberg and his Labor counterpart Jim Chalmers face off at the National Press Club on Wednesday.
While seen as one of key events in any federal election campaign, rarely does the treasurers’ debate meet those expectations.
If past events are any guide, the pair will exchange well-rehearsed barbs but with little chance of their debate producing something new.
However, Tuesday’s rate hike was the RBA’s first during an election campaign since 2007, adding a twist especially for Mr Frydenberg with interest rates now firmly on the rise.
By Colin Brinsden, AAP Economics and Business Correspondent in Canberra, AAP
