Fed: RBA should show caution on rates:ACCI

AAP General News (Australia)
04-06-2010
Fed: RBA should show caution on rates:ACCI

CANBERRA, April 6 AAP - The Reserve Bank of Australia (RBA) should show caution about
raising interest rates too quickly and not choke off early signs of economic recovery,
the Australian Chamber of Commerce and Industry said on Tuesday.

The central bank is holding its monthly board meeting on Tuesday and where a majority
of economists expect it to raise the cash rate for a second month in a row to 4.25 per
cent from 4.0 per cent.

ACCI director of economic and industry policy Greg Evans said there was still an outside
chance that the RBA won't lift rates on Tuesday.

"There is every reason for the bank to be cautious ... there is every evidence that
the economy hasn't really moved out of second gear," Mr Evans told reporters in Canberra.

"This is an economy which isn't moving necessarily in a synchronised fashion."

He said while there were positive sectors such as in mining and mining services, this
was not the overall picture of the economy.

"We certainly don't want the Reserve Bank to choke off any early signs of recovery,
which we are obviously seeing in the economy," he said.

He said the 100 basis point rise in official interest rates so far was having an impact,
particularly for smaller businesses who had seen their loan rates increase by a greater
margin than official moves.

He said if the official rate was lifted on Tuesday, there was every argument that banking
institutions shouldn't necessarily lift them by the full amount.

"Banks have increased their net interest margin so they do have the capacity within
their own balance sheets to not pass on the full official interest rate increases," he
said.

AAP cb/sb/it

KEYWORD: RATES ACCI

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