* Retail sales up 0.4 pct in August, up 4.5 pct on year
* Upbeat result likely to be welcomed by central bank
* RBA seen on hold at Oct. 6 policy review
By Ian Chua
SYDNEY, Oct 2 (Reuters) - Australia's retail sales bounced back in August as consumers spent more at supermarkets and department stores, an upbeat outcome that will cement expectations of steady interest rates at next week's policy review.
Friday's data from the Australian Bureau of Statistics showed retail trade rose an expected 0.4 percent in August, recovering from July's 0.1 percent fall. On the year, sales were up a healthy 4.5 percent.
The positive outcome should be welcomed by the Reserve Bank of Australia (RBA), which holds its policy meeting on Oct. 6. All 25 analysts polled by Reuters see the RBA keeping its cash rate steady at a record low 2.0 percent.
"Today's figures will give the RBA a bit of comfort on the consumer spending front," said Gareth Aird, senior economist at Commonwealth Bank. "We expect the cash rate to be left unchanged."
Driving the positive monthly result were gains in department store sales, food retailing and other retailing, which includes drugs and recreational goods sales.
Sales of household goods climbed a modest 0.2 percent but were up a solid 9.1 percent from a year ago, outperforming the other categories.
"Household goods retailing is the strongest component of retail trade. It's a natural response to the significant pickup in residential construction," Aird added.
Indeed, record low interest rates have helped stoke a housing boom in Australia, particularly in Sydney and Melbourne.
An industry survey on Friday showed new home sales climbed 2.3 percent in August to be just short of a peak reached in April this year.
"It is becoming increasingly apparent that total sales activity has already peaked this year, but today's update shows that sales are remaining elevated," said Diwa Hopkins, an economist at the Housing Industry Association (HIA), which produced the survey.
Yet, some analysts fear that growth in house prices and construction activity will slow in the months ahead.
"This will reduce the wealth and income effects from housing and contribute to slower growth in retail spending into 2016," economists at ANZ warned.