Missing December ingredient sours RBA rates call

IT TOOK just 21 hours to make the Reserve Bank's decision on Tuesday to sit pat on interest rates look a little "brave" and not the sure thing economists were tipping.

December retail sales were an important missing ingredient in the RBA lunch stew, making an argument for its 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 what 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 last year. Looking at the year in total, retail sales growth was modest but reasonable in the first half, 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 on Tuesday made no mention of retail, the closest thing being: "Present indications are that moderate growth in private consumption spending is occurring."

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

Other Bureau of Statistics figures released on Wednesday show a record 908,600 Australians left the country for a short trip in December, the first time the 900,000 mark has been broken. Over the past five years, the numbers of us holidaying abroad has soared more than 50 per cent. In-bound tourism continues to run at record highs, never mind our strong dollar, and a rapidly changing composition has tourism from non-Japan Asia exploding.

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

On that score, there's the $5 billion leap from November to December that you'd expect with the Christmas blow-out, but December 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 is a much better day for lunching.

Michael Pascoe is a BusinessDay contributing editor