But economists have starkly contrasting theories on what would happen next week when the RBA meets after inflation was shown to have fallen to 6 per cent.

However, unemployment remains at 3.5 per cent which indicates the economy was still running strongly.

Westpac’s Bill Evans continued to tip an increase but ANZ was on the side of a continued pause.

ANZ said the retail sales showed how households were dealing with the 12 rate increases since May last year.  The bank said spending had slowed and was now back below levels set in October last year.

“The sharp fall in June retail sales supports the case for the RBA to keep the cash rate on hold at 4.1 per cent,” ANZ said.

The bank believes the pause will be maintained for several months. It was expecting the second quarter retail sales data to show a third consecutive quarter of falls, which had not been seen since the global financial crisis.

But Evans differed.

“The board is expected to be guarded on the positive news on headline inflation for the June quarter. Just as we saw at the May meeting – risks to achieving the inflation path, particularly in 2024, should see the board taking more insurance and maintaining its tightening bias,” Evans said.

The Commonwealth Bank said another increase next week was possible but it maintained it was a “line ball”.

Master Builders Australia chief economist Shane Garrett said plunging steel prices had helped bring building product price inflation to its lowest in almost three years.

However, inflation of other materials and labour shortages was continuing to drive up the cost of building.

“During the June 2023 quarter, the cost of building materials increased by another 0.6 per cent, the smallest quarterly increase since the end of 2020,” he said.

“While the slowdown in the overall cost of home building materials is welcome, there has still been a sizeable increase of 7.4 per cent over the past 12 months.”