Retail trade figures for August revealed a 0.7 per cent increase for the month and 3.1 per cent for the year, with warmer weather driving discretionary spending on outdoor items as well as dining out.
While the spike followed the sluggish 0.1 per cent rise in July, the National Retail Association urged the central bank not to take the data as an indicator to push up interest rates.
The peak body's interim chief executive Lindsay Carroll said while August's figures were trending in the right direction, the retail sector was still struggling.
"The industry is at the mercy of consumer sentiment, that's just the nature of retail. Business owners need every win they can get in the lead-up to Christmas," she said.
"We are asking our policymakers to give retailers some breathing room to recover during this year's holiday sale season."
The last interest rate rise happened in November 2023, weeks before the Black Friday sales.
Australian Retailers Association chief executive Paul Zahra said the Reserve Bank needs to offer a rate cut when it meets to discuss interest rates on November 5.
"Whilst there is great resilience within retail, we know there are many businesses in the sector that are doing it tough, especially small businesses," he said.
Australian Retailers Association Paul Zahra says small businesses are still doing it tough. (Jeremy Ng/AAP PHOTOS)
"This remains one of retail's most difficult years – with a continued slowdown in discretionary spend, high business costs along with ongoing challenges."
NAB senior economist Taylor Nugent said the retail data was a sign federal government tax cuts that kicked in from July were starting to flow through to the rest of the economy.
"Household consumption in Australia has held up better than most advanced economy peers," he said.
Mr Nugent said it was still unlikely the central bank would cut interest rates before February despite the improved retail numbers.
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