Retail spending is on the rise as cashed-up consumers enjoy the benefits of lower mortgage rates.
Recent interest rate cuts and a pre-carbon tax spending splurge are believed to have helped push retail spending in May up by 0.5 per cent to $21.307 billion.
The result, released by the Australian Bureau of Statistics on Wednesday, was above economists' expectations of a 0.2 per cent rise on April's result.
All sectors, except food retailing, exceeded growth estimates.
NSW fared the best out of the states without a booming resources industry, with consumers spending on clothing and homewares.
Macquarie senior economist Brian Redican said it appeared consumers were starting to spend more following the four interest rate cuts the Reserve Bank has made since November.
"This might be the first positive sign from the interest rate cuts," he said.
Australian National Retailers Association (ANRA) chief Margy Osmond said shoppers could have been spending up before the expected price rises associated with the carbon tax kicked in.
"A quarter of people we've spoken to in a recent survey didn't really understand whether or not they would get compensation from the carbon price," she said.
"People may have been doing a little pre-emptive shopping before the end of June."
Ms Osmond said the recent interest rate cuts and the introduction of the government's school kids' bonus also encouraged more people to hit the shops.
HSBC Australia chief economist Paul Bloxham said the data showed that the under-performing retail sector was picking up.
"The parts of the economy that have been weakest recently, housing and retail, are now picking up and we expect that, into the second half of the year, this will continue," he said.
Mr Bloxham said the retail sales figures would reduce the case for further interest rate cuts, although the weak global economy meant the Reserve Bank was likely to cut the cash rate at least once more this year.
NAB senior economist Spiros Papadopoulos said the Clean Energy Advance payments that began being rolled out by the government in May would have helped boosted retail spending.
"In June the boost will be even larger as households received the School Kids bonus that month, too," he said.
"With the upward revision to April, retail sales have now been positive in each month of 2012, so retailing in the first half of 2012 has not been as bad as some industry anecdotes might have suggested."
Treasurer Wayne Swan said the increase in spending was reasonably broad-based and provided more evidence of the resilience of the Australian economy.
"Despite today's positive result, we know that parts of our retail sector remain under pressure from changing consumer preferences and the more cautious consumer behaviour that we've seen since the GFC."
But Australian Retailers Association executive director Russell Zimmerman said the upward trend in retail sales could be short lived.
"The current reality for retailers is every time there is a modest boost such as this, increased economic pressure creates a barrier to any continuation of the trend," he said.