Retail sales on way up across Tasman

Australians are continuing to spend as the Government strives to stave off a recession. Photo / Supplied

Australian retail sales unexpectedly rose in January as households spent more on food and clothing after the central bank cut interest rates and the Government gave cash to families.

Retail sales, seasonally adjusted, advanced 0.2 per cent from December, when they climbed 3.8 per cent, the most in eight years, the Bureau of Statistics said in Sydney yesterday.

The median forecast of 19 economists surveyed by Bloomberg News was for a 0.5 per cent drop.

Consumer spending and earnings at retailers such as JB Hi- Fi are being supported by the lowest borrowing costs in four decades, plus Government cash handouts to low- and middle-income earners.

The central bank has slashed its benchmark interest rate by four percentage points to 3.25 per cent since September, up to Monday.

"Sales remained at a very strong level," said Benjamin Dinte, an economist at Macquarie Group in Sydney. "That said, anecdotal evidence from retailers, as well as very weak consumer confidence, suggests sales will come off."

To stoke spending after the economy expanded at the weakest pace in eight years in the third quarter, the government distributed A$8.9 billion to families and pensioners in December.

Prime Minister Kevin Rudd last month said his Government would distribute another A$12.7 billion to low- and middle-income earners in an effort to stave off a recession.

Spending on eating out rose 2.3 per cent in January and food sales climbed 1.5 per cent, yesterday's report showed. Consumers spent 0.8 per cent more on clothing.

Discount electronics retailer JB Hi-Fi on February 10 reported a 41 per cent jump in net income in the six months ended December 31 on increased sales of video games and flat-panel TV sets.

A report on gross domestic product is due out today.

Company profits slid in the fourth quarter for the first time in more than a year as earnings at manufacturers, builders and wholesalers dropped, a report showed.

- BLOOMBERG