Consumers are still cutting back on spending as tax cuts and successive interest rate cuts have (so far) failed to stimulate Australia's retail sector.

Key points: Retail spending for the month (+0.2 per cent) and quarter (-0.1 per cent) was worse than expected

Retail spending for the month (+0.2 per cent) and quarter (-0.1 per cent) was worse than expected There is no evidence the RBA's interest rate cuts and Government's tax cuts have had much effect

There is no evidence the RBA's interest rate cuts and Government's tax cuts have had much effect Consumer spending accounts for almost two-thirds of Australia's economic activity

Retail spending was significantly worse than expected, according to the latest Bureau of Statistics figures.

This was "the weakest retail spending in 28 years", said CommSec chief economist Craig James.

In September, retail sales lifted by 0.2 per cent to $27.6 billion in September (seasonally adjusted). Overall, this puts retails sales growth at 2.5 per cent over the past year.

It was much less than what the market had forecast (+0.5 per cent), and a steep fall compared to the previous month's result (+0.4 per cent).

The third-quarter result, however, was even worse.

Retail sales volume fell by 0.1 per cent — against market expectations of a 0.2 per cent increase.

"Retail volumes have now recorded falls of 0.1 per cent in three of the past four quarters to be 0.2 per cent lower than [a] year ago," NAB economist Kaixin Owyong said.

"By way of comparison, the last time volumes fell on an annual basis was the 0.6 per cent decline seen in the early 1990s recession."

There were solid gains in retail sales volume for the cafes, restaurants and takeaway services (+0.6 per cent), and food retailing (+0.1 per cent) industries, according to Ben James, ABS director of quarterly economy-wide surveys.

On the flipside, he said the worst performing categories were clothing, footwear and personal accessory retailing (-0.5 per cent) and department stores (-0.2 per cent).

"We estimate that around 60 per cent of the tax refunds had arrived in households' bank account by [the] end [of] September," said Capital Economics' senior economist Marcel Thieliant.

"That leaves another 40 per cent still to arrive in the fourth quarter and it's possible that households will only spend the receipts in the fourth quarter.

"As things stand though, the Government's tax cuts aren't providing any boost to consumer spending.

"That supports our view that GDP growth will continue to fall short of potential next year and that the RBA [Reserve Bank] will have to cut interest rates by more than most anticipate."

Government stimulus is not sufficient

On a state level, the biggest lift in retail turnover was seen in Tasmania (+1 per cent) and Western Australia (+0.7 per cent).

The result, however, was largely unchanged in New South Wales (+0.3 per cent), South Australia (+0.2 per cent) and the Australian Capital Territory (+0.1 per cent) and the Northern Territory (+0.1 per cent).

The worst performing states were Victoria (flat) and Queensland (-0.1 per cent).

Meanwhile, online sales have continued to grow steadily, making up 6.3 per cent of all retail turnover in September — up from 5.6 per cent during the same period last year.

"Low wage growth remains the greatest impediment for the retail sector," said Callam Pickering, an economist at job searching website Indeed.

"Households that are cautious and concerned about their employment prospects and finances has never been a recipe for retail success."

Given domestic consumption accounts for almost two-thirds of Australia's economic activity, Mr Pickering believes the Government needs to do a lot more to stimulate the economy.

"The Federal Government, at the very least, should sacrifice a budget surplus to support the economy.

"In the absence of greater fiscal spending, it will be left to the Reserve Bank to support growth and right now another cut early next year appears both likely and necessary."

The Australian dollar was buying 69.17 US cents before the ABS published its downbeat retail figures at 11:30am (AEDT).

It fell to as low as 69.04 US cents shortly afterwards.