Australians’ spending habits only got stronger last month, with retail spending up 0.9 per cent in September. Oxford Economics now sees a nail in the coffin of a November pause.
“The strength in demand over the past couple of months strengthens the case for another interest rate rise,” Oxford Economics Head of Macroeconomic Forecasting Sean Langcake said.
“Given the strong inflation print for Q3 and the hawkish turn in recent RBA communications, we expect to see another rate hike in November.”
Highs and lows
While the ABS today noted spending remains historically low, the data is still seen as too high.
“Retail turnover in trend terms is up only 1.5 per cent compared to September 2022 – the smallest trend growth over 12 months in the history of the series,” ABS Head of Retail Statistics Ben Dorber said.
But while this may be true, Australia is still grappling with sticky services inflation, war premium oil prices, and most importantly, a supply-side housing shortage that has no real end in sight.
The mainstream rise of women’s sports
A number of factors boosted spending across September, the largest since January.
Among them is the FIFA Women’s World Cup.
Women’s sports have twice this year caused spending upticks across Australia. Back in September, we learned that Australian Q2 CY23 GDP growth was spurred in part by the FIFA Women’s World Cup.
Following the Matildas’ demolition of the Philippines over the weekend, stepping closer to Olympics stardom, it’s likely that attention is set to stay.
Also spurring spending in September was warmer than usual weather driving outdoor enthusiasm, and the new iPhone was also flagged by the ABS as a factor.
A growing chorus
With regards to a November rate rise, Oxford Economics isn’t the first to make the call – something it generally strays from doing unless it’s absolutely certain.
Last week we got stronger-than-expected Australian inflation data, and a more hawkish tone of voice from our great nation’s central bank.
This had already kicked off concerns that a November rate rise was locked in for November.
City Index senior market analyst Matt Simpson – who has been one of the most bullish and pro-pause commentators on The Market Herald’s books all year – last week changed his tone.
Without much fanfare, Mr Simpson highlighted to this publication his newfound view that a November rate rise is probably set to happen.
No surprises to market watchers
Investment bank analysts for the likes of Morgan Stanley and Citigroup have been forecasting the RBA to raise rates by 0.25bps in November for months.
Despite this, more popular retail market narratives have been tending to dismiss this dire projection, with many pundits only several months ago wondering aloud if the RBA would cut rates before 2024.
This was always a fantasy without any real meat to it – as the saying goes, markets can stay irrational longer than companies can stay solvent.
The RBA has consistently voiced its opinion across 2022 and 2023 that inflation won’t return to target until at least 2025.
How, then, did so many people honestly believe the RBA was going to cut rates before Christmas of 2023?
The seductive power of contrarian optimism seems a likely culprit.