SYDNEY: Australian retail sales surpassed expectations in March in a positive sign for the economy as soaring house prices and a surge in employment boosted consumer confidence and spending.

Sales rose 1.4% in March from February, outpacing forecasts for a 1% gain, preliminary data from the Australian Bureau of Statistics (ABS) showed on Wednesday.

Retail turnover of A$30.72 billion ($23.71 billion) was up a hefty 2.3% on March last year, just when the COVID-19 pandemic hit.

Household consumption in recent months has been driven by skyrocketing house prices, government welfare payments, record-low borrowing costs and a surge in employment, all of which have boosted consumer confidence.

Wednesday’s data supports the view that Australia’s A$2 trillion economy is on a solid footing though the Reserve Bank of Australia (RBA) will wait for inflationary pressures to emerge before considering interest rate hikes.

Despite the strong turnover for March, sales values were down 0.1% in the first quarter from the prior three-month period, which will likely mean a 0.8% fall in real terms, said Shane Oliver, chief economist at AMP Capital. “This may also partly reflect a rotation in spending back to consumer services so may not be as negative for quarterly consumer spending as it suggests,” Oliver noted.

“We expect consumer spending growth, which includes retail sales and other services, to remain strong this year reflecting the recovery in jobs”.