* Retail sales flat in Oct vs forecast +0.3%

* Rate cuts, tax rebates fail to boost consumption

* Trade surplus shrinks to A$4.5 bln as exports fall 5%

SYDNEY, Dec 5 (Reuters) - Australian retailers had it tough in October as skittish consumers chose to hoard any windfall from lower interest rates and tax rebates, likely heralding another quarter of disappointment for the economy.

Data out Thursday showed retail sales were flat in October at A$27.6 billion ($18.73 billion), missing forecasts for a 0.3% gain. Clothing, home wares and department stores all saw declines in the month.

The sector had already suffered its worst 12-month stretch since the 1991 recession as shoppers struggled with stagnant wages and sky-high debt.

The dire result was particularly telling as the Reserve Bank of Australia (RBA) had cut interest rates to a record low of 0.75% in early October, its third easing since June.

Neither were government giveaways providing much impetus with billions in tax rebates being saved rather than spent.

That is becoming an increasing headache for Prime Minster Scott Morrison given he won re-election in May on a pledge the economy would always be stronger under his guidance.

“The stagnation in retail sales in October supports our view that consumption growth will continue to disappoint,” said Marcel Thieliant, a senior economist at Capital Economics.

“The government’s tax cuts aren’t boosting spending and mean that the RBA will probably cut interest rates in February.”

Investors are certainty wagering policy makers will have to do a whole lot more to revive spending and futures are fully priced for a rate cut to 0.5% by April, with a real chance of a move to 0.25% by late 2020.

NOT SO MERRY XMAS

Weakness in household consumption was the main reason gross domestic production (GDP) managed only a modest 0.4% gain in the third quarter, and this quarter was looking no better.

There was anecdotal evidence that retailers fared well in November’s Black Friday and Cyber Monday sales, yet history suggests these merely pull spending forward from Christmas.

Adelaide Timbrell, an economist at ANZ, noted the sales surge that used to come in Christmas has been on the wane.

“The growth of online retail and, in particular, heavy discounting coming into the Christmas season may be behind the weakening effect, which has seen a particular downward trend in the last 10-12 years,” she said.

“The rising intensity of competition for the Christmas Dollar, means stabilisation isn’t expected in the short term.”

While retailers were struggling, Australia’s exporters have never had it so good thanks to high prices for key resources and strong Asian demand in the tourist and education sectors.

Yet even they hit a bump in October as a 5% drop in exports shrank the country’s trade surplus by a third to A$4.5 billion.

Iron ore, coal and gold all swung lower in the month in a worrying development given trade has made a critical contribution to the economy in the past year helping stave off recession. ($1 = 1.4736 Australian dollars) (Reporting by Wayne Cole Editing by Shri Navaratnam)