Economists tip interest rates to remain steady

By James Wells

SYDNEY: A recent poll of market economists has tipped that interest rates are likely to remain steady as the Reserve Bank of Australia (RBA) today left the cash rate at 5.5 per cent for the 13th consecutive month.

A poll of 17 economists conducted by news wire service, Reuters, found 11 expected the cash rate to remain the same for the rest of the year.

Strong retail figures, including a report on the Western Australian economy published by the Australian Bureau of Statistics (ABS) today, saw five economists tip a rate rise by the end of the year. Only one economist tipped a rate cut.

Although the RBA declined to comment today on the reasons for leaving the interest rates on hold, it did announce in February and March that the next move in rates is more likely to be up than down.

Data released today by the ABS found retail turnover in Western Australia increased by 0.6 per cent or $32 million in the three months to January 2006, compared to the previous quarter.

Over the same period, national retail turnover increased by 0.8 per cent.

Growth in retail turnover in Western Australia in the three months to 31 January 2006, compared to the three months ending October 31 2005, was highest for household goods retailing which rose 1.5 per cent or $14 million, reflecting the strength of the state’s housing market.

“After peaking at 1.0 per cent in June 2005, growth in Western Australia’s retail turnover has been relatively flat since September 2005, averaging 0.2 per cent per month to January 2006,” the report said.

“Several factors may have contributed to the slowdown in retail spending in the state, including an easing in consumer sentiment throughout 2005, uncertainty about future movements in interest rates and households taking a more cautious approach to finance generally.”

The next meeting of the RBA in May will be influenced by employment data due out this Thursday, inflation data on 26 April and the performance of the Australian dollar.

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