INTEREST RATES OUTLOOK

RBA HOLDS AT 5.5%
The board of the Reserve Bank of Australia has held firm with the basic cash interest rate remaining at 5.5 percent for the second successive month. They made no comment on the economy.

AUSTRALIAN ECONOMY SNAPSHOT
The biggest single reaction to the last interest rate lift in March was announced this week. It shows new housing approvals have dropped to under one percent, the lowest rate of growth in four years, and other new dwellings continue to be negative, this time by 25 percent.

Elsewhere in the economy, a similar picture can be seen with private sector borrowings dropping during March to show less than a one percent growth. Also, the Australian Industry Group says manufacturing growth stayed weak in April with again less than a one percent growth. PriceWaterhouseCoopers says it’s most recent survey indicates that nearly 70 percent of medium-sized businesses have cited a shortage in skilled labour as a big problem with less than ten percent expecting the economy to improve.

Many observers say the March quarter’s CPI result, the best in six years, is the final word on leaving interest rates alone. Also, Treasury is confident no break-out is on the horizon.

BUSINESS NEWS

SMALL BUSINESS UPS & DOWNS
A national survey just completed by MYOB into small businesses has found rising interest rates to be the biggest single worry. Away from such negatives, 80 percent of them insist they are performing well and are mostly confident about the future. Nearly 70 percent say their businesses should grow in the medium term.

MORE BILLIONAIRES
Only three Australians have made the new billionaires list of Forbes magazine which now has nearly 700 names, up over 100 from last year. While Bill Gates and Warren Buffett clearly took top honours, Kerry Packer, Frank Lowy and Richard Pratt rated 94, 151 and 321 respectively.

BUSINESS OUTLOOK

FUEL COSTS HIT TRANSPORT
The continuing high price of fuel is hurting the transport industry more than most says the latest Industry Risk Bulletin from PPB Chartered Accountants. It warns this sector will see an increase in company closures especially the owner drivers and small businesses that make up nearly 70 percent of the industry yet account for less than 12 percent of the total operating income.

U.S. DOWNTURN STRENGTHENS
More economists are now saying the US economy will soon take a battering with shares and house prices taking a drop. The most vocal is Yale professor Robert Shiller who has the ear of Allan Greenspan. Local analysts partially agree with many saying current prices are at best on hold for a number of years. And it was announced overnight that the U.S. Federal Treasury has increased its basic interest rate to three percent with a warning of further increases.

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