Retail sales in Australia continue to grow

August marked the eighth consecutive month of rising retail sales in Australia, indicating that the country's households are coping well with rapidly raising interest rates to fight rising inflation.

Sales rose 0.6% from July, beating economists' forecasts for a 0.4% gain, data from the Australian Bureau of Statistics (ABS) showed on Wednesday. This year, retailers have reported rising sales every month.

The growth was driven by "the combined growth of the food-related industries, with an increase in cafes, restaurants and takeaway services," said Ben Dorber, head of retail statistics at the ABS. Department store sales rose to a new record, while household goods retailing showed its biggest growth since March.

The resilience of consumer spending is likely to reinforce expectations that the Reserve Bank of Australia (RBA) will raise rates by half a percentage point for the fifth consecutive month next Tuesday to bring the rate to 2.85%. The RBA has signaled further rate hikes, prompting money markets to set forecasts at around 3.4% by the end of the year.

The RBA says households are in an established position to weather higher borrowing costs by taking advantage of pandemic-era incentives to build up their savings or pay off their mortgages early.

Moreover, unemployment of just 3.5% means that most Australians have an income to meet their obligations.

Policymakers are closely monitoring spending patterns to assess the impact of a rate hike, which comes with a delay. A sudden weakening could prompt the RBA to halt or slow the tightening cycle, since household spending is about 60% of GDP.