No rate change likely yet, despite data
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CANBERRA, Feb 4 AAP
February 04 2013, 4:21PM
A suite of new economic data has added to the case for lower interest rates but economists expect the central bank to keep the official rate unchanged at its first board meeting of the year on Tuesday.
Building approvals unexpectedly fell, job advertisements remain in decline and monthly inflation pressures stayed comfortably within the Reserve Bank of Australia's (RBA) two to three per cent target band.
TD Securities head of Asia-Pacific research Annette Beacher believes with the RBA having cut the cash rate to a low three per cent in December the board will assume a "wait and see" mode on Tuesday.
"However, we do not believe the board's work is done just yet," she said in a client note on Monday.
Builders believe there is a need for a little more urgency after building approvals dropped by a seasonally adjusted 4.4 per cent in December to 12,757 properties, when economists had expected a one per cent rise.
Master Builders Australia's chief executive Wilhelm Harnisch said the figures should give the central bank cause "to look closely at another rate cut ... tomorrow".
The managing director of the 1300HomeLoan network, John Kolenda, said the RBA had previously erred on the conservative side, but was now faced with an economy in malaise.
"I'd like to see the central bank take more decisive action on the cash rate," said Mr Kolenda, who wants to see 50 basis points of cuts in the short term.
A survey of his broker network found 63 per cent were expecting the cash rate to remain on hold.
Unusually, National Retail Association chief executive Trevor Evans believes it would be appropriate for the RBA to hold fire for now to get a clear picture of the economy - including Wednesday's retail figures for December, the all-important Christmas period.
"Our expectation is that those results will be encouraging but not spectacular. They are likely to point to the need for further cuts down the track," Mr Evans said.
In other data released on Monday, the TD Securities-Melbourne Institute monthly inflation gauge rose by 0.3 per cent in January for an annual rate of 2.5 per cent.
The ANZ job advertisement series, which has posted consecutive monthly falls since April 2012, declined a further 0.9 per cent in January for a total of 18.4 per cent over the year.
"Today's result does not bode well for labour market conditions in 2013," Macquarie Research economist Gabby Hajj said.
However, a new report released by Employment Minister Bill Shorten painted a more optimistic outlook for employment, particularly in services.
"The rise and rise of services is a big part of our recent jobs past and services will continue to be a huge part of our jobs future," Mr Shorten said.
The sector already employed 70 per cent of Australians and would continue to deliver a huge slice of gross domestic product in the future, he said.
The report - Aussie Jobs, Looking Back, Looking Forward - said that while mining was expected to contribute 10 per cent to employment growth over the five years to 2016/17, health care and social assistance alone would add 26 per cent.
By Colin Brinsden, AAP Economics Correspondent