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INTEREST RATES OUTLOOK

RBA HOLDS AT 5.5%
The Board of the Reserve Bank of Australia at its last meeting has held the basic cash interest rate at 5.5 percent.

OVERVIEW OF THE ECONOMY

RETAIL, BORROWING & MANUFACTURING GOOD
An increase in retail spending of 0.7 percent for the last monthly figures is stronger than the market expected. The increase in credit has come out on the high side of what was expected for the last set of figures with 1.3 percent for the month for consumer and housing. The big boost was in business which came in at an impressive 16.5 percent for the same period last year.

Manufacturing also picked up in March with the respected AIG-PricewaterhouseCoopers index lifting a healthy margin due to exports, new orders and inventories all contributing to a rise in production. And right along with those local positives comes the news that the latest external trade imbalance dropped a healthy 2 percent for the last month on record to be the best in four years.

TREASURY HAPPY
The Federal Treasury and its Minister are claiming much of the credit for the stable economic conditions which have now seen interest rates remain the same for 13 months. The Minister is insisting Australia is in the strongest economic period in recent history, adding any pressures on interest rates caused by the falling Aussie dollar will be countered by rising oil prices. This together with pressure coming off wage rises will mean rates could stay at the present level for some time.

GLOOMY HORIZONS
However contrary to the Federal Treasurers delight, a growing number of financial analysts are becoming increasingly worried about the effects of the trend in the US where interest rates appear to be continually rising. They say the situation may influence Australia where among other things it is resulting in a reduction in our dollar, which in turn impacts on our ability to service the high overseas debt, thus placing strain on our interest rates.

HOUSING SLUMPS
The housing construction industry is in trouble pointing out new housing starts have dropped to the low level of the post GST slump some years back. Among the main reasons for this the industry says is the high taxes which now total around 25 percent on an average new house in the outer suburbs. This increase is nearly 150 percent in recent years.

BUSINESS NEWS

THAT 5000 MARKET
When the local stock market fuelled by good commodity prices had its best March in 17 years and hit the magic 5000 mark, the achievement became the latest milestone. The All Ords number has nearly doubled in three years as in March 2003 it stood at 2600. Then it went on to hit 4000 in late 2004 and has since put on another 25 percent in just 15 months. This rate of growth is so rapid that many analysts are now claiming it is unsustainable and a slowing or a correction is inevitable sooner than later.

TAX GOLD MEDAL
Just when you thought Victorians and their politicians were looking good after the Commonwealth Games, the true cost to the tax payer is becoming known. From a projected $160 million a few years ago the total is now thought to be around $700 million that will have to come from taxes. NSW tax payers are finding $42 million annually for decades to handle debt left from the Sydney Games.