The declining spending power of consumers is hurting retailers and pointing to a revenue squeeze for the federal government, economists say.
Retail trade fell 0.1 per cent to $25.69 billion in the month of February, missing market expectations of a 0.3 per cent rise, according to the Australian Bureau of Statistics.
In the year to February, retail trade was up just 2.7 per cent, the slowest growth in since July 2013.
Commonwealth Bank economist Michael Workman said the figures were disappointing and showed that weak wage growth was just keeping consumer incomes in line with sluggish inflation, meaning their spending power was not growing.
"It's quite a weak result really. Any fall is quite poor and annual growth is lowest since late 2013," he told AAP.
"That means life is pretty tough for a lot of the retailers."
Meanwhile, JP Morgan economist Tom Kennedy said the composition of spending was also concerning, with the only substantial growth in sales being in the non-discretionary area on items such as food.
"When times are good in the economy, people are happy to spend more and that's captured in the discretionary side of things," he told AAP.
Mr Workman noted that the figures were bad news for the federal government ahead the May budget because they provided further evidence that its major revenue base, income tax, would be nearly stagnant.
He said the widely discussed rise in household power bills, and possibly petrol prices, in coming months would likely put further pressure on retail spending.
The Australian dollar had tumbled to 76.12 US cents by 1239 AEST on Monday, down from 76.36 just before the figures were released at 1130 AEST.
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