Retail sales strong but rate rises biting

Retail sales have hit another record high as consumers remain unfazed by rising interest rates and cost-of-living pressures.

Retail trade rose for the ninth month in a row, lifting another 0.6 per cent in September.

Spending reached a record high of $35.1 billion, and was 17.9 per cent higher compared to the same time last year.

Consumers are still splashing out on food, with food retailing lifting one per cent and cafes, restaurants and takeaways up 1.3 per cent.

"Many retailers remained open for the National Day of Mourning, an additional one-off public holiday in September, and this boosted spending on food, alcohol and dining out," Australian Bureau of Statistics head of retail statistics Ben Dorber said.

The latest retail trade numbers also revealed strong spending on clothing and footwear.

But the figures showed a slight drop-off in household goods retailing, which has been flatlining in recent months, and department stores falling by 0.4 per cent.

The 0.6 per cent surge in retail turnover followed a 0.6 per cent hike in August and a 1.3 per cent surge in July. 

Sean Langcake from BIS Oxford Economics said price inflation was feeding into higher sales, suggesting consumers actually were reining in spending.

"This is especially true of food and hospitality sales, where costs have increased due to the impact of floods on fresh produce prices, and rising labour costs," Mr Langcake said.

He also said the slowdown of retail sales growth in discretionary items suggested households were starting to feel the effects of higher interest rates and soaring inflation.

"With more interest rate increases to come, we expect momentum in consumer spending will slow further," he said.

Another interest rate hike is expected when the Reserve Bank of Australia's board meets for its November rates decision on Tuesday.

KPMG senior economist Sarah Hunter said the latest retail trade figures would help to cement a rate hike on Melbourne Cup day. 

"Equally the numbers are not out of line with the RBA's stated current view of the economy, and a 0.25 per cent point rise looks to be the most likely outcome," Dr Hunter said.

Petrol prices also edged upwards across every state except Western Australia, adding around 4.8 cents a litre at the pump nationally. 

The average petrol station is now charging $1.84 a litre, with the wholesale average sitting at $1.75 a litre. 

In South Australia and the Northern Territory, retailers at the upper end of the scale are charging more than $2 a litre.

CommSec's Craig James said the push and pull factors behind oil prices remained unchanged, including COVID-19 lockdowns in China dampening demand and the oil-producing countries restricting production to drive up prices.

Meanwhile, housing data released by the ABS showed the slowest annual increase in dwellings in five years, with the nation's stock rising by 1.4 per cent.

More than 146,000 dwellings were added in the year to June, taking the national total to 10.9 million.