While consumption growth in Australia held up well in the first quarter, there is little chance that an increase in household spending will prevent the economy from slowing. Employment and wage growth look set to weaken in the second half of the year, while support for real incomes from lower petrol prices will soon fade. Admittedly, there is scope for the household savings rate to fall further from its current high level, but that is unlikely to be enough to stop consumption growth slowing. In fact, the stagnation of retail sales in April suggests that consumers are already tightening their belts.
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