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A SURPRISING rise in retail sales during November could slow the pace of Reserve Bank of Australia's (RBA) cuts to interest rates, an economist says.

Retail sales rose 0.4 per cent in November in seasonally adjusted terms, figures from the Australian Bureau of Statistics (ABS) show, far above the market's forecast of a 0.3 per cent fall.

ANZ senior economist Katie Dean said the retail result was much better than expectations, with consumers not as reticent as many feared.

"Clearly lower interest rates and also lower petrol prices have given households some reason to be a little bit more confident in their spending," Ms Dean said.

"Part of this could be inflation related, that is from the weaker currency flowing to higher prices."

"Volumes did probably hold up pretty well."

Australian retail trade at current prices rose 0.1 per cent in November in trend terms to $18.423 billion, from an upwardly revised $18.398 billion in October.

The trend estimate rose 1.9 per cent over the year.

The market forecast was for a trend rise of 0.1 per cent in November.

Ms Dean said the anecdotal reports about Christmas shopping indicated a good result for December.

"The reports that the Christmas season went pretty strong does suggest the consumer sector will make a pretty positive contribution to growth in the fourth quarter," she said.

The better than expected result for November and the upward revision for October would have the central bank toning down their aggressive rates cuts, though more were to come, Ms Dean said.

"It will be a more modest approach to easing policy from here," she said.

"We do expect further cuts given the deterioration in the global environment.

"Also we do expect the consumer sector will weaken over 2009 as the unemployment rate climbs."

RBC Capital Markets senior economist Su-Lin Ong said sales were given a boost from consumers with more cash because of cheaper petrol.

"The underlying trend remains soft, 0.1 per cent, but the data hint at some policy traction assisted by much lower fuel prices - fuel prices averaged $1.26 per litre in Nov compared with $1.60 in July," Ms Ong said.

"The boost to disposable income coupled with a still healthy labour market has underpinned some modest expenditure following a period of consumer retrenchment in q2 & q3.

"Assisted by one-off payments from the government's $10.4 billion fiscal package from 8 December, the anecdotes also suggest a reasonably firm Christmas/holiday shopping period."

Ms Ong was cautious about future consumption in a slowing economy.

"Firstly, there is no doubt that substantial discounting is underpinning headline sales growth at the expense of margins," she said.

"This is not sustainable.

"Secondly, we wonder if recent expenditure, especially on big ticket items, are the last big spend before consumers bunker down again amid a likely rise in the unemployment rate this year to around six per cent by year end."

The Reserve Bank of Australia (RBA) aggressively cut the cash rate three percentage points since September but it still had more cuts to come, though at a more moderate pace, Ms Ong said.

"We think that developments thus far, including (Wednesday's) sales data, are consistent with our base case view for a moderate 50 basis points cut on 3 February as the cash rate heads to a terminal level of three per cent by q2."