Lessons of a banker's lunch leave lot to digest

IT'S taken just 21 hours to make yesterday's Reserve Bank decision to sit pat look a little "brave" and not the sure thing market economists were tipping.

IT'S taken just 21 hours to make yesterday's Reserve Bank decision to sit pat look a little "brave" and not the sure thing market economists were tipping.

December retail sales were an important missing ingredient in the RBA lunch stew, making an argument for RBA board meetings to be held on the second Friday rather than the first Tuesday of the month.

If the RBA was relying on its industry liaison for a reading on the state of Australian shopping, the advice must have been the same as retailers have told media: that Christmas was a little better than last year but nothing flash. And looking at the December-on-December trend from the Bureau of Statistics trend series, that was the case: retail sales were up just 2.5 per cent on December 2011.

But the trend series shows the value of retail sales effectively flatlined over the last four months of 2012. Looking at the year in total, retail sales growth was modest but reasonable in the first half of the year, wobbled in July, fell in August and stayed on the mat thereafter. December was actually negative by 0.1 per cent.

The RBA governor's brief statement after Tuesday's meeting made no mention of retail, the closest thing being that: "Present indications are that moderate growth in private consumption spending is occurring."

That's supported by record car sales and overseas travel, but spending in the shops isn't growing.

More intriguing about the retail figures is that while everyone's shouting about the seasonally adjusted number (down 0.2 per cent) and only the occasional oddball concentrates on the trend series, forgotten are the original numbers, the raw unadjusted dollars counted.

There's the $5 billion leap from November to December you'd expect with the Christmas blowout, but December 2012 was up just 0.8 per cent - $218 million - on December 2011.

The structural changes in retail, including how much stuff we're bringing back with us from overseas rather than buying at home, cloud the picture, but there's enough in the statistics to make the RBA concerned about whether slowly softer monetary policy is working. Friday's quarterly statement on monetary policy should be particularly interesting reading. With January labour force statistics to come on Thursday, the RBA might well think Friday a better day for lunching.

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