Consumer spending puts further risk on rate rise

Australian consumers spent freely in July as the national mood continues to be bright thanks to record employment conditions, strong consumer confidence and budget tax cuts. Retail sales increased 0.9 per cent in July to a record 19.29 billion dollars, markedly higher than market expectations. The strong sales data has economists tipping the third quarter to be healthy across the broader economy, whilst a lower trade deficit of $756 million for July indicates that trade may be in a position to contribute to economic growth in the quarter, after recovering from a weaker second quarter.

However all this good economic news means that those with a mortgage or extensive borrowings will continue to eye the Reserve Bank with caution as the risk to interest rates will continue to be for further increases. Borrowers are expected to be left alone in the first week of September as the global credit crisis has seen markets reduce the likelihood of an increase to virtually zero and with business borrowing up by 19.4 per cent annualised many business owners (and their employees) will breathe easy.

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