RBA leaves rates on hold

The Reserve Bank has left interest rates on hold for a fifth straight month, but said they will rise again soon.

Many economists had expected the central bank was going to raise the cash rate for the first time in five months, although others had said it would be a line ball decision.

Governor Glenn Stevens said the official cash rate, at 4.5 per cent, was delivering borrowers interest rates around their average levels.

''The board regards this as appropriate for the time being. If economic conditions evolve as the board currently expects, it is likely that higher interest rates will be required, at some point, to ensure that inflation remains consistent with the medium-term target,'' he said.

''Asset values are not moving notably in either direction, and overall credit growth is quite subdued at this stage, notwithstanding evidence of some greater willingness to lend. Inflation has moderated from the excessive pace of 2008. The effects of the rise in tobacco taxes aside, CPI inflation has been running at around 2.75 per cent over the past year. That looks likely to continue in the near term.''

The decision comes after new figures out today showed job ads and retail trade are rising, albeit slowly, while small businesses and the services sector are still facing challenging conditions.

An ANZ survey found the number of job ads rose 0.7 per cent in September. Newspaper ads were down 1.9 per cent nationally, but rose 5.9 per cent in the ACT, while national internet jobs rose 0.8 per cent.

ANZ chief economist Warren Hogan said it was the fifth consecutive rise in total job ads. While the pace of growth was easing, the results still suggested businesses' hiring intentions were solid and the unemployment rate would fall further.

''Continued growth in job advertisements over September increases the likelihood that the unemployment rate will fall below 5 per cent by year-end. This will see skills shortages emerge and will put upward pressure on wages growth ahead of the expected peak in Australian economic growth,'' he said.

Meanwhile, the latest Australian Bureau of Statistics data showed a small increase in retail trade and a fall in international trade.

Retail sales rose a seasonally adjusted 0.3 per cent to $20.464 billion in August, as expected.

''Cafes, restaurants and takeaway food services (1.5 per cent) recorded the largest increase in August after a strong result in July followed by other retailing (1.4 per cent), household goods retailing (0.5 per cent) and department stores (0.6 per cent). Sales in clothing, footwear and personal accessory retailing (-1.5 per cent) and food retailing (-0.3 per cent) recorded a fall,'' the bureau said.

The ACT recorded the equal-second largest increase, of 0.7 per cent.

In separate data, the bureau said Australia recorded an improved balance of goods and services in August, however, it came at the cost of falling imports and exports.

The balance of goods and services was a seasonally adjusted surplus of $2.346 billion up from the downwardly revised $1.743 billion recorded in July.

Exports were down 2 per cent to $24.71 billion.

''Non-monetary gold fell $401 million (32 per cent), non-rural goods fell $145 million (1 per cent) and rural goods fell $85 million (3 per cent). Services credits rose $23 million (1 per cent),'' the bureau said.

Imports were down 5 per cent to $22.37 billion.

''Intermediate and other merchandise goods fell $1.05 billion (12 per cent), capital goods fell $127 million (3 per cent) and non-monetary gold fell $78 million (22 per cent). Consumption goods rose $42 million (1 per cent). Services debits rose $4 million,'' it said.

Also today, the Australian Chamber of Commerce and Industry's latest survey of investor confidence forecast a further deterioration in business conditions and confidence, and said the results suggested the optimism since mid-last year had been overstated.

Chamber director Greg Evans said most business indicators had fallen marginally below last year's levels.

''The results indicated that businesses have become increasingly less optimistic about their own business circumstances and the health of the Australian economy for the next three to 12 months,'' he said.

The Australian Industry Group-Commonwealth Bank's services indicator dropped 1.9 points to 45.6, indicating the sector contracted in September. It was the eighth time this year that it came in below the 50-point mark that separates expansion from contraction.

Industry group chief executive Heather Ridout said the sector had been weak for most of the year.

''A wide variety of factors appear to be contributing to this weakness, including tentative consumers and business influenced by political uncertainty, volatility in the global economy, the prospect of higher domestic interest rates and the ongoing withdrawal of fiscal stimulus,'' she said.

Source: The Canberra Times