Cut cash rate - everyone is hurting: ACCI
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CANBERRA, Dec 3 AAP
December 03 2012, 4:56PM
Business believes the central bank must cut the official cash rate at its final board meeting for the year because the economy is hurting across the board.
The Reserve Bank of Australia (RBA) board meets in Sydney on Tuesday, and financial markets are betting on a strong chance of a 25 basis points reduction in the cash rate to three per cent.
This would be the lowest level since the depths of the 2008-2009 global financial crisis.
It will also be the last chance of a reduction until the board meets again in February.
Australian Chamber of Commerce and Industry (ACCI) chief economist Greg Evans said a rate cut was needed now, and again early next year.
"Clearly the mainstream economy urgently needs further stimulus in the way of an interest rate cut," Mr Evans told reporters in Canberra on Monday.
"There is barely an area in the mainstream economy that you would say is trading without difficulty."
The ACCI's demand was backed up by a string of data on Monday suggesting the economy was in desperate need of a further boost: flat retail spending, tumbling company profits, falling demand for workers and a further contraction in manufacturing.
One positive was an unexpected jump in business inventories - stock on shelves or in warehouses - which should contribute to the growth result in Wednesday's quarterly national accounts report.
But even then it was not clear whether this was an intended build-up of stock, or unintended because of slack demand.
The Australian Bureau of Statistics said retail spending in October was barely changed from September at $21.6 billion, while growth declined in all sectors apart from food retailing.
"There needs to be an interest rate cut tomorrow in order to stimulate consumers and ensure any available cash is put into their pockets in the lead-up to Christmas," Australian Retailers Association executive director Russell Zimmerman said in a statement.
Business hiring intentions also continue to slide, with the ANZ job advertisement series declining a further 2.9 per cent in November to be 17 per cent lower in the past year.
"Without a solid pick-up in the non-mining sectors as the mining investment boom winds back through 2013, the unemployment rate is set to drift higher to 5.75 per cent by mid-2013," ANZ's head of economics Ivan Colhoun said.
"Without further monetary policy easing, the unemployment rate may rise towards six per cent by the end of 2013."
At least one other private survey indicated inflation won't stand in the way of a rate cut.
The TD Securities inflation gauge for November fell 0.1 per cent for an annual rate of 2.5 per cent, and smack in the middle of the RBA's two to three target band.
The impact of the federal government's carbon tax since July 1 has barely registered.
"The evidence just continues to pile up that (Opposition Leader) Tony Abbott's irresponsible carbon scare campaign has run out of puff," Treasurer Wayne Swan said in a statement.
But shadow treasurer Joe Hockey said the weak spread of data just highlighted the unnecessary pressure consumers and business were being put under as a result of "Labor's chaotic economic management".
By Colin Brinsden, AAP Economics Correspondent