Business

Rate cut hasn't convinced peak bodies on business confidence

RATE CUT: Australia’s central bank cut its benchmark interest rate by a quarter of a percentage point to a record low 2.5% last week because of slower growth and weakening commodity prices.
RATE CUT: Australia’s central bank cut its benchmark interest rate by a quarter of a percentage point to a record low 2.5% last week because of slower growth and weakening commodity prices. AAP Imagesrob Griffith

BUSINESS peak bodies have been lukewarm on the idea that last week's cut to official interest rates could boost business confidence in regional Australia.

Chamber of Commerce and Industry Queensland general manager for advocacy Nick Behrens said the interest rate cut was welcome but the cuts were increasingly ineffective.

"From our perspective (the) cut will not necessarily benefit businesses because in recent times consumers have been opting to further pay down debt instead of purchasing goods and services with the boost in their disposable income," Mr Behrens said.

"This does little to improve confidence among business owners or consumers, which is currently the biggest issue facing businesses in what is a difficult trading environment."

Mr Behrens said CCIQ's latest Pulse survey for the June quarter reported business confidence and sales revenue among small businesses in the state had fallen after peaking in the March quarter.

"There are a number of factors that have contributed to this drop in confidence, but the underlying issue appears to be the continued instability in federal politics," Mr Behrens said.

He said the country was in the unfortunate position where interest rate cuts were not having their intended effect and, to some extent, instilled further fear in consumers.

"If anything, we have reached a point where further rate cuts will only serve to cement the view that our economy is in a difficult position, which erodes confidence even more," Mr Behrens said. NSW Business Chamber chief executive officer Stephen Cartwright, in his state's north to launch a series of events and billboards for the Small Business Too Big To Ignore campaign, expressed

concern about what yet another rate cut said about the state of the economy. "On the one hand it is a sign the economy is slowing and there is not a lot of consumer confidence and business, but the flipside is that it is the right thing for the Reserve Bank to do," Mr Cartwright said.

Topics:  business confidence cash rate interest rates rate cut rba



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