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208869
Thu, 09/22/2011 - 14:43
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http://m.oananews.org//node/208869
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Cut rates this year, Westpac tells RBA
(AAP)- Economists at one of Australia's largest banks are urging the central bank to cut interest rates before the end of the year after a new survey showed the manufacturing sector continues to deteriorate.
But two speeches from the Reserve Bank of Australia's (RBA) top brass in the past 24 hours suggest it is in no haste to move rates, let alone cut them.
The Westpac-Australian Chamber of Commerce and Industry (ACCI) quarterly survey of industrial trends "celebrated" its 200th edition, or 50th year, recording a second consecutive quarterly contraction in manufacturing conditions.
Westpac chief economist Bill Evans said the survey sent a very clear message on interest rates.
"It is time for the authorities to ease financial conditions," Mr Evans said in the report released on Thursday.
"The case for lower rates is now strong. This survey enforces that case."
The survey's composite index fell 1.2 points in the September quarter to 47.7 points, remaining below the crucial 50-point mark that separates economic expansion from contraction.
The quarterly expected composite index also fell, to 49.8 points from 53.1 - adding up to a decline of 15.3 points over the past six months.
"The basic message is that conditions facing the Australian manufacturing sector are actually deteriorating or contracting, they are not standing still," ACCI director of economics and industry policy Greg Evans told reporters in Canberra.
At a time when the survey usually shows some "buoyancy" in the run-up to Christmas, manufacturers are worried about international outlook, particularly the debt crisis in Europe and the faltering recovery in the US, as well as ongoing speculation of interest rate rises here.
Westpac senior economist Huw McKay, at Mr Evans side, agreed it was a "sombre" survey.
"The flexibility that the Reserve Bank hinted at in its most recent (board) minutes, we really feel they should act upon that before the end of the year," Mr McKay told reporters.
Still, a speech by deputy central bank governor Ric Battellino in New York on Wednesday reiterated that it was too early to know whether the impact from recent global market turmoil will overwhelm the positives on the economy from China's demand for resources.
"For one thing, nobody yet knows when, or how, the issues that are causing the financial turmoil will be resolved," Mr Battellino told a capital markets forum.
Hours later in Sydney on Thursday, assistant governor Philip Lowe said while many retailers are struggling because households are saving more, he didn't believe that consumers had squirreled away too much at this stage.
Dr Lowe expects net savings to be 10 to 12 per cent of household disposable income in the period ahead.
"I think that's a good thing, because if we do, that's building up buffers in the household sector," he told an economic forum.
Mr Evans said the trends survey has had the capacity in its 50-year history to detect shifts in the economy, well before other indicators such as the national accounts.
However, he said the composition of the manufacturing sector has changed since the early 1960s, when it accounted for 26 per cent of employment, rather than less than 10 per cent now, and a quarter of national output compared with under 10 per cent currently.
"But clearly, what happens in the manufacturing sector is a good signpost for what is happening in many sections of the economy," Mr Evans said.
But two speeches from the Reserve Bank of Australia's (RBA) top brass in the past 24 hours suggest it is in no haste to move rates, let alone cut them.
The Westpac-Australian Chamber of Commerce and Industry (ACCI) quarterly survey of industrial trends "celebrated" its 200th edition, or 50th year, recording a second consecutive quarterly contraction in manufacturing conditions.
Westpac chief economist Bill Evans said the survey sent a very clear message on interest rates.
"It is time for the authorities to ease financial conditions," Mr Evans said in the report released on Thursday.
"The case for lower rates is now strong. This survey enforces that case."
The survey's composite index fell 1.2 points in the September quarter to 47.7 points, remaining below the crucial 50-point mark that separates economic expansion from contraction.
The quarterly expected composite index also fell, to 49.8 points from 53.1 - adding up to a decline of 15.3 points over the past six months.
"The basic message is that conditions facing the Australian manufacturing sector are actually deteriorating or contracting, they are not standing still," ACCI director of economics and industry policy Greg Evans told reporters in Canberra.
At a time when the survey usually shows some "buoyancy" in the run-up to Christmas, manufacturers are worried about international outlook, particularly the debt crisis in Europe and the faltering recovery in the US, as well as ongoing speculation of interest rate rises here.
Westpac senior economist Huw McKay, at Mr Evans side, agreed it was a "sombre" survey.
"The flexibility that the Reserve Bank hinted at in its most recent (board) minutes, we really feel they should act upon that before the end of the year," Mr McKay told reporters.
Still, a speech by deputy central bank governor Ric Battellino in New York on Wednesday reiterated that it was too early to know whether the impact from recent global market turmoil will overwhelm the positives on the economy from China's demand for resources.
"For one thing, nobody yet knows when, or how, the issues that are causing the financial turmoil will be resolved," Mr Battellino told a capital markets forum.
Hours later in Sydney on Thursday, assistant governor Philip Lowe said while many retailers are struggling because households are saving more, he didn't believe that consumers had squirreled away too much at this stage.
Dr Lowe expects net savings to be 10 to 12 per cent of household disposable income in the period ahead.
"I think that's a good thing, because if we do, that's building up buffers in the household sector," he told an economic forum.
Mr Evans said the trends survey has had the capacity in its 50-year history to detect shifts in the economy, well before other indicators such as the national accounts.
However, he said the composition of the manufacturing sector has changed since the early 1960s, when it accounted for 26 per cent of employment, rather than less than 10 per cent now, and a quarter of national output compared with under 10 per cent currently.
"But clearly, what happens in the manufacturing sector is a good signpost for what is happening in many sections of the economy," Mr Evans said.
