The 0.2% decline in retail sales is too early to point to as an indicator that things are slowing down. The fall was worse than expected but is just one single data point. We can’t read too much into it. We need to take it into context — jobs are strong, wages are starting to rise and overall economic activity remains solid.

What we think is happening is consumers start to cut back on their spending in anticipation of higher housing and general living costs. Mortgages are starting to get more expensive and will rise further in cost next year. Capital city rents are rising and housing supply is tight. It makes sense that we’re seeing discretionary elements of the economy tighten.

Bottom line: The whole point of raising interest rates is to curtail spending, particularly discretionary spending, which can cause inflation. Retail is perhaps slowing faster than anticipated given that inflation is already high, which means volumes are falling. A good outcome for the economic balancing act and something that the RBA will be pleased about.

No change to our outlook for two more 25 bpts increases before a pause next year.