Retail spending is still soft, as weak consumer confidence outweighs any boost from falling petrol prices.
Australian retail trade rose 0.2 per cent in December, official figures show, which was short of economists' expectations, but was stronger than the 0.1 per cent rise in November.
The result was weighed down by a 0.9 per cent fall in department store spending and a 0.4 per cent fall in the household goods category, the Australian Bureau of Statistics said on Thursday.
CommSec economist Savanth Sebastian said the result was soft and signifies why the Reserve Bank is looking to stimulate the economy.
"It certainly suggest that consumers aren't out there spending in droves, despite an improving economic climate," he said.
"Rates will remain low and there will be more rate cuts to come, so that may alleviate some of the pressures on household budgets and improve the optimism about the outlook."
On Tuesday the RBA cut the cash rate by a quarter of a percentage point to 2.25 per cent, saying that the unemployment rate will peak higher than expected.
ANZ economists Katie Hill and Felicity Emmett said an improvement in consumer confidence is needed for retail spending to bounce back significantly.
"These data confirm that retail sales lost momentum at the end of 2014 and lower petrol prices and a falling Australian dollar have done little to boost sales," they said.
"Electronics sales surprisingly rose another 1.5 per cent in the month and the bulk of the earlier strength in electronic sales, which include the iPhone 6, is yet to unwind."
They said if you exclude spending on electronics, retail sales rose just 0.1 per cent in the month, which suggests that underlying momentum in retail sales remains soft.
"Retail sales should make a solid contribution to GDP growth in the fourth quarter but we hesitate to extrapolate the strength to non-retail spending given retail has been a poor guide to aggregate household spending recently," ANZ said.
Over the December quarter, retail sales rose 1.5 per cent to $69.435 billion, seasonally adjusted.
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