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Speaker 1: New SIBU ejectaim twenty five to seven Australian retail sales

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Speaker 1: have rebounded, so there are zero point seven percent, but

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Speaker 1: expectations heading into the data release we're looking at about

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Speaker 1: zero point four so twice as good as expectations. It's

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Speaker 1: all being put down to a warm August. It follows

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Speaker 1: growth of just zero point one percent in July. Paul

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Speaker 1: Bloxham is HSBC's chief economist and his weathers this evening. Hi,

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Speaker 1: Paul good A, So how has a warm August encouraged spending?

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Speaker 2: Well, these numbers are seasonally adjusted, so strictly speaking they

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Speaker 2: should adjust for the fact that there are weather patterns,

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Speaker 2: of course, but if you get an unusually unusual weather pattern,

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Speaker 2: an unusually warm months, for example, people might spend a

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Speaker 2: bit on outdoor activity and so on. And that's what

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Speaker 2: the ABS has really been pointing out in those numbers.

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Speaker 2: But I don't think that's the key story. I think

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Speaker 2: the key story here is that there has been tax relief.

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Speaker 2: Tax cuts have come through, there's been cost of living

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Speaker 2: relief as well, and household incomes in Australia have gotten

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Speaker 2: a bit of a boost in July and into August,

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Speaker 2: and people are starting to spend just a little bit

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Speaker 2: of that. They're saving some of it, but they're spending

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Speaker 2: some of it. So I think part of the lift

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Speaker 2: in the consumer spend, which we're expecting actually will continue

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Speaker 2: in the coming months and is going to be a

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Speaker 2: feature of this second half of this year for Australia

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Speaker 2: is about that relief, is about more income coming their way.

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Speaker 2: The challenge there, of course, is if demand picks up

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Speaker 2: in the economy, you get a bit more consumer demand

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Speaker 2: at a time when inflation is still not as low

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Speaker 2: as it needs to be, then it means the RBA

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Speaker 2: isn't able to cut interest rates. So while it's a

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Speaker 2: positive story because the consumer spending a bit more, it

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Speaker 2: means that rate relief is still quite a distance away.

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Speaker 1: Yeah, it talk to us a bit more about that.

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Speaker 1: What do you think it means for the inflationary outload.

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Speaker 2: Well, we think inflation is going to prove to be

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Speaker 2: sticky in Australia. We've been saying this all year long. Actually,

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Speaker 2: we don't think the RBA is going to be cutting

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Speaker 2: interest rates this year, and we thought that the rate

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Speaker 2: cuts are probably not coming through till twenty twenty five,

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Speaker 2: and that's been out of view consistently, and the numbers

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Speaker 2: are playing out that way. So it's a combination of

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Speaker 2: two things. It's both the demand is still holding up,

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Speaker 2: as we talked about consumers starting to spend a little

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Speaker 2: bit more because there's a bit more fiscal stimulus coming through.

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Speaker 2: But the primary thing is that the supply side of

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Speaker 2: Australia's economy is really quite poor, is really quite weak.

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Speaker 2: We've seen productivity that's been quite weak as well. So

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Speaker 2: that combination is leaving us with a cost base that's

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Speaker 2: running a bit too quickly and sticky inflation. The RBA

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Speaker 2: isn't I don't think then. I don't think they're going

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Speaker 2: to be able to cut interest rates until well into

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Speaker 2: twenty twenty five.

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Speaker 1: That's interesting. So what are you making of the chances

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Speaker 1: of a big cut to the cash right here next week?

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Speaker 2: Well, I think there are options here. I think the

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Speaker 2: RBNZ is going to cut and I guess there are

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Speaker 2: options to cut twenty five or cut fifty, and we'll

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Speaker 2: have to see what they decide to do. I mean,

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Speaker 2: keep in mind, it was, you know, back in August

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Speaker 2: when they cut they'd told us in May, just in

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Speaker 2: May prior to that that they didn't think they were

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Speaker 2: cutting until well into next year, and they thought there

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Speaker 2: was a possibility might list break from someone. It's actually

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Speaker 2: really quite difficult to read the RBNZ at the moment

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Speaker 2: in terms of the way they are likely to respond

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Speaker 2: to the data. But what we know is the economy

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Speaker 2: is weak. GDP is week growth this week, and we

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Speaker 2: know there are science and inflations coming down too. So

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Speaker 2: I think we can fairly confidently say the arbiens it's

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Speaker 2: going to deliver another cut next week.

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Speaker 1: Yeah right, I can't, but twenty five point fifty basis

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Speaker 1: points anyone's guess at the stage.

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Speaker 2: It's tricky. It's difficult to know because, as I say,

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Speaker 2: it hasn't been that clear exactly what data they're following

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Speaker 2: in terms of how they're reacting.

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Speaker 1: Okay, hey, thanks for time, Paul, appreciate it as always,

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Speaker 1: HSBC Chief Economist. For more from Hither Duplessy Alan Drive,

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Speaker 1: listen live to news Talks it'd be from four pm weekdays,

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