No room for an interest rate rise

5 July 2011

The State’s leading business membership organisation, Business SA, welcomed today’s decision by the Reserve Bank Board to maintain official interest rates at 4.75 per cent.

Business SA Chief Executive Officer, Peter Vaughan, said that any rise in interest rates would have been damaging to the local economy.

“We welcome the Reserve Bank’s decision to leave interest rates on hold and we can see no justification for any rise this year,” Mr Vaughan said.

“Retail figures released yesterday confirmed that consumer confidence remains low and many businesses are doing it tough.

“Interest rates should not be used to slow down the mining sector, particularly when small businesses across the State are struggling in the slower gear of the two speed economy.

“It is essential that the economy is able to build some momentum in the second half of this year, easing the strain on the sectors that are so important to our State.

“The uncertainty surrounding the carbon tax is adding further pressure to businesses and as costs go up, prices will follow and this will make businesses less competitive and put jobs at risk.

“With consumers not spending and businesses being faced with rising wages, utility bills, rates and levies, interest rates must be left on hold for the remainder of the year.

“The Reserve Bank will be well aware of the damage that was caused to the economy when rates were last increased before Christmas, which was compounded by the excessive rate increases passed on by the major banks.”