Interest rates may require further cut

3 July 2012

The State’s leading business membership organisation, Business SA, has responded to today’s decision by the Reserve Bank Board to maintain official interest rates at 3.50 per cent.

Business SA Chief Executive Officer, Nigel McBride, said that while today’s decision was expected, confidence levels require a further boost.

“There was the expectation that interest rates would remain on hold today, however the Reserve Bank must consider another cut in the coming months,” Mr McBride said.

“While the benefits of the past two rate cuts may still be flowing through the economy, businesses remain under pressure from low consumer sentiment and rising costs.

“With the introduction of the carbon tax this week and businesses also forced to pass on Fair Work Australia’s increase in wages, the pressures on business continue to grow.

“We do have a very resilient business community here in South Australia, however the Reserve Bank must acknowledge the challenges being faced by the many small operators throughout the State and country.

“The banks did not deliver the full reduction of rate cuts over past couple of months which restricted the relief to businesses and households.

“As we enter the second half of the year, many businesses throughout the State need the opportunity to build some much needed momentum.”