Retail sales in large drop

Retail sales slumped in July to a two-year low, new figures have indicated.

The Australian Bureau of Statistics revealed there was a 0.8 per cent ($21.4 billion) drop in the value of sales in the month, in contrast with the 1.2 per cent increase in June.

It was the worst month for department stores in Australia in seven years and this may reflect an increasing reluctance of consumers to add to their credit card debts at a time when the eurozone problems are causing wider concern about the prospects for the world economy.

"Sentiment is pretty fragile given everything that's going on in the euro area," remarked senior economist in Sydney at Commonwealth Bank of Australia James McIntyre.

He suggested this could push the Reserve Bank of Australia (RBA) towards another rate cut.

Figures recently published by the RBA indicate that Australians have been gradually paying down their credit card debt since 2006, following a period where this rose between ten and 20 per cent each year.