KEY POINTS:
Retailers need not fret about the Reserve Bank keeping interest rates high because there are signs that the Christmas period will be robust, economists say.
The Reserve Bank stayed true to market expectations by keeping the official cash rate at 8.25 per cent on Thursday and gave no hints as to when it was likely to come down.
Reserve Bank Governor Alan Bollard took a surprise swipe at any administration which might seek to cut taxes at next year's general election or increase spending, because of the added inflation implications those policy changes would bring.
Most economists expect the cash rate to remain at its current level for the next year at least.
But the retail sector and the economy have remained resilient in this high interest rate environment, having already weathered four rate hikes so far year.
"As far as we can tell, consumer confidence still seems quite buoyant, and yet some of the retail data is quite soft," UBS New Zealand economist Robin Clements said.
"But the December (2006) and March (2007) quarters were just massive, so it's hard to see that being repeated," he said.
Economists say the economy is still tight, but that the housing sector is slowing.
The Reserve Bank, in Thursday's announcement, said while the turbulence in global financial markets has eased somewhat, considerable uncertainty remains.
But Clements said that even if those uncertainties were to suddenly disappear, the bank would still be left with a strong economy with all the attendant inflationary pressures.
Deutsche Bank NZ chief economist Darren Gibbs said the four rate hikes so far this year should have put a "sizeable dent" in retail sales but the Roy Morgan survey for mid-October points to a buoyant retail sector.
The Roy Morgan Consumer Confidence Rating is up 12 points to 128 - the largest fortnightly movement since confidence fell 12 points in early February 2006.
This period's result is 2.8 points above the 2007 average of 125.2 and 3.7 points above the October average of 124.3.
September credit card billings and electronic transactions data also pointed to strong retail sales.
"So at the moment retail sales are not quite as bad as you would think, considering the clear weakness in the housing market," Gibbs said.
Gibbs said people still have every reason to feel buoyant, despite high mortgage rates.
"You have a lot more people employed this Christmas than there were last Christmas, and the labour market looks pretty strong," he said.
"People are getting pretty hefty wage improvements, certainly at least from what they were getting 12 months ago. But I don't think retailers have a lot to fear about this Christmas."
