Australian Discretionary Retailers Surge

By Rishav Chatterjee and Kumar Tanishk

(Reuters) – Australian discretionary retailers hit a record for the third straight session on Thursday, after cooling inflation data raised hopes of an interest rate cut as early as next month, potentially boosting spending on non-essential items.

The S&P ASX 200 Consumer Discretionary sub-index gained as much as 1.6% on Thursday, also hitting records on Tuesday and Wednesday.

Analysts expect Australian discretionary retailers to benefit from interest rate cuts in 2025, which would give shoppers more money to spend on items such as electronics and footwear.

Data on Wednesday revealed that consumer prices rose at their slowest pace in nearly four years during the last three months of 2024, while easing home prices helped cool core inflation. This development opens the door for the Reserve Bank of Australia to lower borrowing costs as soon as February.

The country’s four major banks—Commonwealth Bank of Australia, National Australia Bank, Westpac, and ANZ—all anticipate interest rate cuts starting next month.

“Expectations of a February cut have boosted the local market, particularly in rate-sensitive stocks across the tech and consumer discretionary sectors,” stated Stella Ong, a market analyst at share trading platform Superhero.

Lower rates and taxes are likely to encourage consumers to spend after two years of cutting back on non-essential purchases amid a cost-of-living crisis.

“The setup for the consumer in 2025 looks more promising, with expected tax and rate cuts relieving some cumulative pressures on household budgets, which should support a return to normalized spending growth,” noted equity analysts at Morgan Stanley in a research note.

The sub-index was boosted on Thursday by major players like Wesfarmers, which owns retailers Target and Kmart, adding 1%. Aristocrat Leisure, a gaming firm, saw an increase of 3.5%.

Morgan Stanley expressed optimism for both Kmart and Wesfarmers’ hardware chain Bunnings.

Harvey Norman, an electronics retailer, and quick-service restaurant Guzman y Gomez also advanced, each gaining 1.5% on Thursday.