- Matthew Hassan, Westpac
Australian retailers reported weaker sales growth in March, justifying the RBA's latest decision to reduce interest rates to a new low in an attempt to boost demand. Australian retail sales climbed by a less-than-expected 0.3% in March from a month earlier, and by a lower-than-predicted 0.7% in the first quarter from the final three months of 2014. Economists had expected a 0.4% increase in March and 1.0% growth for the quarter. The largest contributor to the increase in sales was department stores, where turnover soared 3.8%, while clothing, footwear and personal accessory retailing rose 2.2%, and food retailing edged up 0.4%. However, those strong gains were offset by a sharp 3.7% decline in electronics and a steep 2.2% decrease for takeaway food.
The Reserve Bank of Australia slashed interest rates earlier in the week for the second time this year, but signalled it was increasingly satisfied with the fact that household demand is beginning to respond to ultra-low interest rates. The official cash rate target was cut to 2.0% from 2.25%. RBA Governor Glenn Stevens said that weak inflation settings had allowed the central bank scope to ease monetary policy further. Nevertheless, the RBA refrained from giving any guidance on future rate decisions, leading many analysts to expect that the move was the end of the RBA's easing cycle.
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