Low wage growth, higher electricity and gas bills and out-of-cycle mortgage rate increases have been blamed for a slump in consumer spending in July and August - the worst since 2010.
Retail spending slid 0.6 per cent in August after sliding 0.2 per cent in July.
Spending in cafes and restaurants and on takeaway food plunged 1.3 per cent in August to be only a little higher than it was the previous August, and lower per person after taking into account population growth.
Spending on household goods slid 1 per cent in August after sliding 2.1 per cent in July. Spending on food slipped 0.6 per cent, and spending on clothing 0.2 per cent after slipping 0.4 per cent. The only sectors where spending climbed were department stores, where spending climbed 0.7 per cent after sliding for three consecutive months, and "other retailing" where spending climbed 0.1 per cent.
"Apparently, Australians were dieting over August," said Bank of Melbourne senior economist Janu Chan. "There were sizeable declines in food retailing and cafes restaurants and takeaway. The slow pace of wage growth, rising household debt are constraining retail spending. The falling household savings ratio also suggests a limit on how much households can tap into savings for additional consumption."
Commonwealth Bank senior economist Gareth Aird was more blunt.
"The report is a shocker," he said
"We are always reticent to put too much emphasis on any one data print, but it now looks increasingly likely that strong sales growth in April and May were the anomaly in 2017. The other six months have so far been weak."
Annual sales growth was just 2.1 per cent, the slowest in four years and barely above the population growth rate of 1.6 per cent. Unusually, the weakness was present in all eight states and territories, with NSW bearing up the best in August with a drop of 0.2 per cent and Victoria and Queensland the worst with a drop of 0.8 per cent.
Commonwealth Securities chief economist Craig James said the apparent decline in spending might reflect lower prices as a result of trimmed margins. Or it might be that weighty electricity and gas bills were forcing consumers to cut discretionary and non-essential spending.
"Consumers are also still adjusting their mindset to lower wage growth," he said.
"Wages are still outpacing prices, but the slower nominal wage growth makes consumers feel poorer."
Mr James said the economists who had tipped a Reserve Bank rate rise in early 2018 might be "going back to their calculators". JP Morgan economist Ben Jarman said the retail slump increased the likelihood that the Reserve Bank would cut rates rates further before it raised them.
Mr Aird said households were devoting more of their wallets to health, education and electricity and gas.
"Consumers have a finite amount of disposable income and even with the assistance of a falling savings rate, record low wages growth has weighed significantly on the discretionary parts of retail trade," he said.
The slow growth in online retailing was helping consumers by pushing down prices but hurting retailers by depriving them of business.