Sensible decision to leave interest rates on hold

2 August 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 had certainly hoped interest rates would remain on hold and we welcome this decision by the Reserve Bank,” Mr Vaughan said.

“Last week’s increase in inflation is expected to be temporary and we therefore can see no justification for a rise in interest rates this year.

“Low consumer confidence is restricting spending and businesses throughout the State are facing increased wages, utility bills, rates and levies.

“Today’s building approvals confirm that many areas of the economy remain under significant pressure and interest rates should not be used to simply slow down the mining sector.

“It is essential that the economy is able to build some momentum in the second half of this year, easing the strain on some of the sectors here in South Australia.

“The uncertainty surrounding the impact of the carbon tax is adding further pressure to businesses, particularly in regards to costs, the impact on employment and overall competitiveness.

“The Reserve Bank must not forget the damage that was caused to the economy when rates were last increased before Christmas, and the excessive rate increases passed on by the major banks.

“Results released today from the June quarter Business SA Survey of Business Expectations, indicate that business confidence has decreased 11 per cent, the third consecutive fall in confidence.”