Australian households have been more resilient to low income growth and falling house prices than we expected. After rising by just 0.3% q/q in the first quarter, the solid rises in retail sales in recent months imply that real consumption rose by about 0.7% q/q in the second. But that may not be enough to prevent the 1.0% q/q rise in GDP in the first quarter giving way to a 0.5% q/q gain in the second. And with house prices set to fall at a faster pace, we suspect it is only a matter of time before consumption growth slows.
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