Australian Reserve Bank urged to hold on rate rise

13:10, January 06, 2010      

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The Australian Chamber of Commerce and Industry (ACCI) said on Wednesday the Reserve Bank should not raise interest rates early this year because economic conditions remain "patchy and lackluster".

ACCI's latest investment confidence survey revealed actual conditions remain well below previous expectations.

"The survey shows that economic and business conditions are both patchy and very lackluster," ACCI economics director Greg Evans told reporters.

That was partly due to the Reserve Bank raising the official cash rate in October, November and December last year, he noted.

"There may have been room for some increase in interest rates but the three successive rate rises, we believe, have had a cumulative and potentially negative impact on Australian business," Evans said.

"We would certainly not be recommending a further rate rise in February on the back of the evident weakness displayed in this survey."

The ACCI survey revealed that sales, profitability and investment did improve slightly in the three months to December, but the latter two measures remained negative.

The first six months of 2010 would remain "quite difficult" for business, especially smaller and medium sized enterprises.

"We dodged the main fallout of the global financial crisis ... but it's going to be a long and difficult road back to the sorts of above trend growth that we've experienced in previous years," he added.

Source: Xinhua
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