BUSINESS SLAMS RBA FOR HOLDING INTEREST RATES
5 July 2012,
THE Reserve Bank of Australia (RBA) has left the base borrowing-rate unchanged at 3.5 per cent.
The decision sparked criticism from businesses planning to pass additional costs of the new Carbon Tax onto customers.
The Australian National Retail Association (ANRA) says an interest rate cut was needed to help restore consumer confidence, which it says has been unsettled by the new tax that began on Sunday.
ANRA warns the RBA’s inaction will prevent customers from spending as they wait with “bated breath and sealed wallets for the impact of the carbon price to hit family budgets”.
“It is not yet clear how much the carbon price will carve into family spending, nor how much the promised government assistance families manage it will loosen purse strings,” says ANRA CEO Margy Osmond.
“Unless there is some light at the end of the tunnel for homeowners in the form of future rate cuts, retailers will continue to struggle in light of low consumer confidence and shoppers too concerned about their finances to come in-store.”
Master Builders Queensland also denounced the RBA decision to keep rates on hold, saying it fails to send a strong signal that interest rates will not increase.
“We believe the market is just starting to turn and a further reduction in interest rates would have been a strong incentive for buyers who are holding off,” says construction policy director John Crittall.
However, the bank defends its position and says the outlook for inflation is unaffected by anticipated effects of the Carbon Tax.
“The [RBA] board judged that with inflation expected to be consistent with the target [up to 3 per cent over two years] and growth close to trend but, with a more subdued international outlook than was the case a few months ago, the stance of monetary policy remained appropriate.” says governor Glenn Stevens in a written statement.
The RBA previously reduced the borrowing rate in May and June by 75 percentage points during the two-month period.