CCIQ President expresses concerns about RBA Monetary Policy
27 January
Chamber of Commerce & Industry Queensland President David Goodwin is today urging the Reserve Bank to hold off increasing interest rates at their February meeting next week based on today's consumer price index data for the December 2009 quarter.
Headline inflation at 2.1 per cent is now at the lower end of Reserve Bank target range, with the results for Brisbane also painting a picture of holding off on any rate rise.
The Brisbane CPI rose by only 0.3 per cent in the December quarter and 2.5 per cent over the year to December 2009.
While inflation threats must be contained, CCIQ is overwhelmingly of the view that the Queensland economy is not experiencing the same level of economic recovery that is occurring elsewhere in Australia.
Queensland is particularly reliant on industries where discretionary income plays a pivotal role in determining consumer demand.
Many businesses are worried that the RBA is acting too aggressively in its actions and is hindering or will in fact halt our fledgling recovery.
Following three successive official interest rate hikes, coupled with some major lenders increasing their lending rates by more than the official rate rise, RBA's monetary policy settings are a paramount issue for sunshine state businesses.
It is important to note that many businesses have endured substantially reduced profitability and even losses in order to retain existing staff during the recent downturn. Businesses need time to rebuild capital and to return to profitability.
At the moment the greater threat to jobs and economic activity is not inflation but consumer and business confidence. Any decision to keep increasing interests rates will snuff out confidence levels.
An interest rate rise in February would add to business costs when the lag effects of the three rate rises at the end of 2009 have not yet flowed through the economy.
On the basis of today's inflation figures the Reserve Bank should take a more cautious approach to any plans to tighten monetary policy further.
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