Recent figures indicate the retail environment remains subdued, with Australian Bureau of Statistics (ABS) data showing retail turnover grew by just 0.3 per cent to a seasonally adjusted $50.68 billion in the December quarter.

And in an indication that the sector has begun 2006 on a soft note, the Cashcard retail activity index shows spending was down 0.6 per cent in January to an adjusted $17.2 billion. CommSec chief equities economist Craig James said people were spending at the moment but were being very careful about what they decided to purchase.

"The Australian consumer isn't hiding under his or her bed," he said. "People are spending but spending quite cautiously." With house prices barely moving and high petrol prices still a concern, people were choosing to reduce the amount owing on their credit cards. "Consumers have elected to pay down their debt and get their debt down to more manageable levels," he said. But Australians were still forking out for the more sought-after items.

"The key sorts of goods being purchased at the moment are the digital consumer products - iPods, digital cameras, DVD players and mobile phones," Mr James said.Prices for digital goods and clothing were falling, while cars were more affordable, he added.

"Certainly you can't say that balance sheets are in bad shape at present, particularly given the fact that interest rates are historically low, so that's certainly one factor that people haven't got to worry about," he said. "Wages are rising, and the share market remains healthy, and that's serving to boost wealth in other ways rather than just relying on house prices."