We’re still spending cautiously

Australians are still spending cautiously in the wake of the global economic crisis

And new signs suggest that the nation’s economic growth might have peaked, at least in the short term.

The forthcoming election – and the rapid passing of the Federal government’s stimulus packages – are accentuating the spending pause, which has now become evident.

Higher fuel prices and the six interest rate rises, that Australia has already seen in the current round, are also contributing to this slowdown.

“People are just waiting to see what happens with the election – so getting that out of the way will be a good thing.” Woolworths’ Chief executive Michael Luscombe said.

The retail giant had just reported a full-year sales increase of 4.2 per cent,  a result that fell short of  market expectation of a 5 per cent rise.

This announcement followed news earlier yesterday that the Westpac Melbourne Institute leading index had slowed for the second successive month.

The bank’s Chief Economist, Bill Evans, said that although the growth rate in the index is still “remarkably high” this slowing still indicates that economic growth may have peaked, at least in the short term.

The index points to the likely pace of economic growth three to nine months in the future.

Woolworths’ admitted that it has been among many Australian retailers that have had to curb prices to maintain sales.

However Mr Luscombe said  this strategy is proving effective.

“This combination has driven increased market share, customer numbers, items sold and basket size,” his  company said in a statement.

Meanwhile, Bankwest economist Tim Crawford warned that a tightening labour market would make the Reserve Bank wary of inflation risks.

The Reserve Bank Governor, Glenn Stevens, has also  warned that his bank won’t hold off on a necessary increase in rates, at its meeting next month, merely because a Federal election is imminent.