Australian retail sales chugging along steadily, if unspectacular

Australia's nominal disposable income growth may not be spectacular - at 3.6% yoy in Q4 and averaging 4.0% in 2014 - but that has not kept Australian consumers out of the shops. In Q1, nominal retail sales were up 4.1% yoy, off their 4.8% pace in Q4, but still notably above income growth, and in April similar growth (4.6%) is expected, says Societe Generale. 

Two reasons go a long way towards explaining the divergence. One, expenses on energy are way down (these are not captures in these data), and two, the wealth effect from rising residential property prices is encouraging a decline in the household savings rate. That said, the current growth rate is somewhat below the average of the previous 15 years (5.2%), but then inflation explains that shortfall easily: the average inflation rate over the past 15 years was 3.0%, but in Q1 2015 it was 1.3%, and over 2014 as a whole it came to 2.5%. Basically, there is nothing wrong with Australian retail sales.