Australians appear reluctant to open their wallets at a time of low wage growth, raising concerns among retailers for the traditionally high spending months in the run-up to Christmas.
New figures showed retail spending growth declined for the second month in a row in August and risks putting a dampener on overall economic growth for the September quarter.
August retail trade dropped 0.6 per cent, the worst monthly performance in more than four years.
It included a 1.3 per cent tumble in cafe, restaurants and takeaway food spending.
It came after a downwardly revised 0.2 per cent decline in July spending and together was the largest two-monthly drop in seven years.
Commonwealth Bank economist Gareth Aird described the report as a "shocker".
"It's not surprising to see such weak retail trade outcomes given household income growth is so soft. But two consecutive monthly falls look at odds with the recent strength in the labour market," he said.
Australian Retailers Association executive director Russell Zimmerman blamed increased energy costs, higher tax burdens and an inflexible wage system for the concerning result and called for government action to lift confidence.
While retail spending is only a proportion of overall household consumption, JP Morgan economist Ben Jarman says it does set up a headwind for GDP in the September quarter.
"The consumption data challenge the RBA's assertion that growth will move back above potential," he said.
There was slightly better news on Australia's international trade position, with a near $1 billion surplus in August as exports rose one per cent compared to flat imports.
It followed an upwardly revised $808 million surplus in July, nearly double the amount previously reported.
Exports benefited from a spike in the iron ore price in August.
However, Westpac senior economist Andrew Hanlan thought the trade performance for the September quarter so far has been "underwhelming".
"Pending a late flurry of exports in the September month, there is the risk that real net exports are flat to a negative," he said.
