Delay in rate rise likely: economists

SYDNEY (AAP) - Homeowners could enjoy an even longer reprieve from an eventual rise in interest rates, with one major bank suggesting an increase could be put off until early next year.
This will be music to the ears of the federal government as it flounders in opinion polls and a new survey suggests that its handling of the economy has deteriorated since the May budget.
The latest weekly Essential Research online poll found that 43 per cent of voters believe the economy is heading in the "wrong direction", up from just 29 per cent in May.
Of the 1,037 polled, 43 per cent thought the coalition would be better at handling the economy, compared with just 26 per cent backing Labor.
But nearly a quarter said it makes no difference who is holding the purse strings.
The Reserve Bank of Australia (RBA) holds its monthly board meeting on Tuesday, but economists believe there is no justification for a rate move at this stage given the recent spate of soft economic data.
"The most reasonable approach to monetary policy at the present time would appear to be for the RBA to maintain current interest rates and monitor developments in broader macroeconomic indicators," ANZ head of Australian economic research Ivan Colhoun says.
New data on Monday showed an unexpected fall in retail spending and a larger than forecast drop in building approvals, while private surveys showed tame inflation, and only a partial recovery in demand for workers.
Opposition treasury spokesman Joe Hockey latched on to a 7.9 per cent drop in home building approvals in May, saying the falling national trend was of "immense concern".
Economists had expected a more modest 0.5 per cent fall in approvals.
"The fear of higher interest rates and the uncertain impact of Labor's carbon tax is affecting the confidence of the industry and potential buyers," Mr Hockey said in statement.
Australian National Retailers Association CEO Margy Osmond also blamed a 0.6 per cent drop in retail spending for May on these two factors.
Economists had expected a 0.3 per cent rise in spending.
"Australians need to know what this carbon price will mean for them as individuals, so they can see the real impact on their household budgets and plan accordingly," she said in a statement.
ANZ has pushed back the timing of its expectation for an increase in the Reserve Bank's cash rate to February next year, having been at 4.75 per cent since November 2010.
While the central bank has been vocal in warning that rates may need to increase "at some point" faced with a mining investment boom and a low unemployment rate, Mr Colhoun doubts the performance of non-mining sectors of the economy justifies even one rate move, let along a series of hikes.
Economists at Commonwealth Bank of Australia, the country's biggest home lender, are sticking with their expectation for a rate rise in August, but concede that the odds of a move have lengthened.
"But it is worth remembering today's data are the weak parts of the two-speed economy story," Commonwealth strategist Joseph Capurso said.
"The Reserve Bank is well aware of the `split personality' of the Australian economy and still maintains its tightening bias."
Key to the interest rate outlook will be official inflation data on July 27.