Describing the Australian economy as still “fundamentally quite weak” and business conditions as “patchy and lacklustre,” the Australian Chamber of Commerce and Industry called for the RBA to pause before raising interest rates a fourth time during their next scheduled meeting in February.

The association’s most recent survey of Australian businesses showed mixed results. Although forecasts for sales, profitability, and business conditions all improved to levels not seen since October of 2007, forecasts for investment still have not improved.

Higher interest rates, of course, mean higher payments for mortgages, credit cards, and business loans, which could stifle expectations for future business expansions even as the economy recovers.

The RBA raised interest rates to 3.75% over three consecutive months in the final quarter of 2009, and effects are already being felt in various parts of the economy. For example, manufacturing activity in December decreased back into a recessionary contraction, while services activity barely held at breakeven levels. While approvals for residential construction rose almost 6.0% in November, they’re expected to fall off rather drastically due to the higher interest rates, as well as the reductions in the first-time home buyers’ programme.

During their deliberations in February, the RBA will consider this data and other statistics related to the Australian economy, such as jobless claims, consumer prices, and retail sales. Opinions amongst economists and pundits are mixed as to whether the improvement seen in the data to date will convince the central bank to raise rates yet again.

Source: heraldsun.com.au