The West

Interest rate cuts and federal government handouts will help retail spending grow at its fastest pace since the 2008-2009 global financial crisis, an independent forecaster says.

Deloitte Access Economics is forecasting real - or inflation adjusted - retail sales to grow by three per cent in 2012/13, up from an expected two per cent in 2011/12, and after 0.7 per cent in 2010/11.

Interest cuts by the Reserve Bank of Australia in November and December last year helped to lift spending in the early part of 2012, and the central bank has since cut the official cash rate by a further 75 basis points.

"Markets have been betting on more rate cuts through the remainder of 2012," Deloitte Access Economics director David Rumbens said in the forecaster's quarterly retail report released on Thursday.

"Those cuts will free up a substantial chunk of disposal income."

The May 2012/13 federal budget also included a number of measures to boost the economy, notably payments for school-age children and extra welfare spending.

Mr Rumbens said the "cash splash" was likely to support retailing in the short-term, although some payments were effectively one-offs, while others would be offset by cost of living increases.

He also noted wages growth was picking up, which may help sustain retail growth at a reasonable level over 2012 and 2013, while employment growth was expected to improve modestly in the next year.

"But risks continue to remain high, particularly in relation to the global economy," Mr Rumbens said.

"Many households may take the opportunity to run down debt faster rather than spend the extra money in their pockets."

The West Australian

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